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BITUMINOUS  COAL  MINE 
ACCOUNTING 


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BITUMINOUS   COAL  MINE 
ACCOUNTING 


BY 
W.   B.  REED 

SECRETARY    OF    THE    NATIONAL    COAL   ASSOCIATION, 
CONSULTING   ACCOUNTANT,    FEDERAL   TAJ^ATION;   FORMERLY   AUDITOR,   THE   NEW   RIVER 
COMPANY,    THE  WHITE   OAK  COAL   COMPANY 


First  Edition 


McGRAW-HILL  BOOK  COMPANY,  Inc. 
NEW  YORK:  370  SEVENTH  AVENUE 

LONDON  :  6  &  8  BOUVERIE  ST.,  E.  C.  4 
1922 


Copyright,  1922,  by  the 
McGraw-Hill  Book  Company,  Inc. 


PREFACE 

In  response  to  numerous  requests  to  the  National  Coal  Asso- 
ciation for  suggestions  and  more  detailed  forms  than  contained 
in  the  "Report  and  Suggestions"  of  its  Cost  Accounting  Com- 
mittee, the  author  prepared  a  series  of  articles  on  ''Cost  Ac- 
counting in  the  Bituminous  Industry"  which  were  printed  in 
Coal  Review.  To  meet  the  desire  of  many  who  wish  to  have 
these  articles  in  more  permanent  and  usable  shape  arrangements 
have  been  made  to  issue  them  in  book  form.  Several  new  chap- 
ters have  been  added,  and  the  subject  matter  has  been  expanded. 
In  their  original  scope  the  articles  were  intended  to  cover  only 
cost  matters,  but  in  this  book  some  questions  of  general  account- 
ing pertinent  to  the  bituminous  coal  mining  industry  have  been 
touched  upon  also. 

The  importance  of  proper  accounting  has  probably  never  been 
more  clearly  felt  than  at  the  present  time.  The  necessity  for 
having  an  adequate  cost  accounting  system  has  been  stressed 
within  the  past  few  years  by  trade  associations,  government 
agencies  and  accountants  generally. 

In  the  coal  industry  this  was  a  particularly  important  subject 
during  the  recent  war,  sales  prices  being  fixed  by  the  Fuel  Ad- 
ministration based  on  cost.  At  all  times  a  knowledge  of  the  cost 
of  production  is  an  absolute  prerequisite  to  price  making.  A 
corporation  without  a  cost  system  is  like  a  ship  without  a  com- 
pass. 

Business  is  conducted  for  the  purpose  of  making  a  profit,  and 
the  business  man  is  entitled  to  a  margin  between  his  cost  and 
selling  price.  An  adequate  cost  finding  system  is  intended  to 
eliminate  guess  work.  To  be  of  value  to  the  industry  such  a 
cost  system  should  be  more  than  a  historical  record  of  trans- 
actions long  closed. 

It  is  questionable  when  a  cost  system  is  maintained  merely  for 
the  purpose  of  history,  whether  it  is  worth  the  cost  of  its  com- 
piling.    If  this  is  its  entire  use  the  question  might  reasonably 


500G21 


vi  PREFACE 

well  be  asked  ''How  much  does  your  cost  system  increase  the 
cost  of  production  ? " 

A  cost  system  properly  employed  should  be  so  arranged  that  it 
will  tell  from  day  to  day  the  variations  from  a  standard  or 
theoretical  cost.  By  its  proper  arrangement  the  management 
may  feel  each  day,  so  to  speak,  the  pulse  of  operation,  and  know 
from  time  to  time  what  is  happening  in  the  industry.  Knowing 
what  is  happening,  those  charged  with  the  management  are  able 
to  fix^  the  responsibility  and  control  the  operation. 

An  adequate  cost  system  must  not  only  give  current  infor- 
mation, but  must  be  a  historical  record  as  well,  and  being  such  a 
record,  must  tie  intimately  and  accurately  into  the  general  ac- 
counting scheme. 

The  drafts  and  descriptions  of  forms  which  accompany  the 
text  are  suggestions  only  and  are  not  introduced  with  the  idea 
that  they  are  the  only  ones  which  can  be  used  or  are  better  than 
those  prepared  by  accountants  in  the  industry.  The  trained  ac- 
countant familiar  with  the  problems  of  his  own  organization  will 
be  better  able  to  devise  methods  and  detailed  forms  which  will 
fit  his  particular  organization  and  answer  his  particular  prob- 
lems than  is  one  not  on  the  ground.  They  are  presented  rather 
with  the  idea  of  being  helpful  in  smaller  organizations  which 
have  not  had  the  benefit  of  expertly  trained  assistants. 

In  this  book  the  assumption  is  that  the  general  office  and  the 
mine  office  are  located  at  different  points  and  that  the  general 
office  is  dependent  upon  the  local  office  for  certain  reports  which 
will  uniformly  bring  to  the  management  and  the  accountant  the 
pertinent  facts  connected  with  the  operation,  in  order  that  the 
former  may  know  what  is  happening  from  day  to  day,  and  that 
the  latter  may  be  able  systematically  to  build  up  his  accounts. 

May  I  also  add  a  word  in  behalf  of  the  accountant.  Too  fre- 
quently the  accounting  department  of  an  organization  is  looked 
upon  by  the  management  either  as  a  useless  expense  or  as  a 
necessary  adjunct  which,  although  expensive,  must  be  endured. 
Absolutely  the  reverse  is  the  case.  The  well  trained  accountant, 
particularly  the  one  who  has  spent  some  years  with  the  business, 
is  and  should  be  in  many  respects  one  of  the  best  informed  and 
most  valuable  of  the  concern's  officers  or  employees,  and  the  ac- 
counting department  one  of  the  most  valuable  to  all  departments 
of  the  business. 


PREFACE 


Vll 


The  accountant  should  have  advance  information  on  all  ex- 
penditures, that  he  may  be  able  to  lay  his  accounting  plans  ac- 
cordingly and  without  delay.  It  is  essential  that  he  have  this  in- 
formation, because  to  him  falls  the  decision  as  to  whether  certain 
charges  are  capital  accounts  or  items  of  expense.  His  must  be 
a  long-range  vision.  As  charges  come  to  him  he  must  visualize 
them  in  their  final  resting  place  on  the  balance  sheets.  It  is  to 
him  that  the  management  and  the  directors  must  look  for  lucid 
statements  of  the  cost  of  operation  and  of  their  financial  affairs, 
and  he  should  at  all  times  be  in  their  confidence. 

Generally  speaking,  in  corporations  of  medium  size,  the  or- 
ganization will  take  somewhat ^of  the  following  form: 


Board 

of 

Directors 


President " 


General  ^ 
Manager 


Treasurer 
Secretary 


Manager 

of 

Mines 

Account- 
ant 

L  Sales  Mgr. 


Superin- 
tendents 


Account- 
ing    Staff 

Sales 
Force 


Mine 
Foremen 

Weigh 
Masters 

Mine 

Clerks 


Mine 
Staff 


This  will  vary,  of  course,  according  to  the  form  of  organiza- 
tion. In  some  cases  the  secretary  and  treasurer  are  responsible 
also  to  the  general  manager.  In  some  instances  the  mine  clerks 
and  weighmasters  are  directly  responsible  to  the  general  man- 
ager rather  than  to  the  local  superintendent,  and  in  some  cases 
mine  clerks  are  directly  responsible  to  the  accounting  depart- 
ment. 

Kegardless  of  the  form  of  organization  there  must  be  the  clos- 
est kind  of  cooperation  between  the  operating  staff  and  the  ac- 
counting department  if  proper  results  are  to  be  achieved.  The 
accountant  should  be  consulted  regarding  any  change  of  forms 
even  if  only  remotely  related  to  the  accounting  procedure. 

The  forms  for  cost  accounting  which  accompany  the  text  fol- 
lowing are  gathered  from  a  number  of  sources ;  all  have  actually 
been  used  in  bituminous  coal  mine  accounting.  Many  are  origi- 
nal forms  prepared  by  the  author ;  others  have  been  prepared  in 
the  main  by  the  accountants  of  various  companies  and  adapted 
for  use  in  the  accounting  of  the  mining  companies  with  which 
the  author  was  formerly  connected.  Acknowleds^ment  is  made 
to  the  Anthracite  Operators  for  the  general  form  of  the  balance 


viii  PREFACE 

sheet  and  tlie  text  whicli  accompanies  it.  Both  have  been  con- 
siderably changed  to  fit  more  nearly  the  needs  of  the  bituminous 
mining  industry. 

W.  B.  Reed. 
Washington,  D.  C, 
July,  1922. 


CONTENTS 

PAGE 

Preface      v 

CHAPTEB 

I.   Uniform  Cost  Accounting 1 

II.   The  Mine  Tonnage  Record 54 

III.  The  Day  Labor  Record 62 

IV.  Yardage  and  Dead  Work  JIecord 66 

V.   Daily  Cost  Sheets 80 

VI.   Accounting  for  Supplies 84 

VII.   Power  House  Fuel 91 

VIII.    Royalties 95 

IX.   Depletion  of  Mineral 99 

X.   Amortization  of  Leasehold  Values 107 

XL    Depreciation                    119 

XII.    Insurance  and  Taxes 129 

XIII.  General  Expenses 136 

XIV.  Sales  Statistics 147 

XV.   Miscellaneous  Profit  and  Loss  Accounts  ....  169 

XVI.   The  Store  Department 173 

XVII.    Interest 177 

XVIII.    The  Voucher  System 180 

XIX.   The  Balance  Sheet              . 191 

Index 217 


rx 


BITUMINOUS  COAL  MINE 
ACCOUNTING 

CHAPTER  I 
UNIFORM  COST  ACCOUNTING 

Prior  to  the  World  War  little  attention  had  been  given 
by  coal  operators  generally  to  the  fundamentals  of  cost 
accounting.  Some  talked  in  terms  of  long  tons,  others  in 
terms  of  short  tons.  Some  few  operators  had  a  cost  sys- 
tem which  was  complete  and  exhaustive,  others  had 
worked  out  a  system  not  so  complete.  The  larger  number 
of  the  cost  forms  were  either  incomplete  or  misleading. 
In  some  sections  of  the  country  coal  operators'  associa- 
tions had  been  formed  for  the  study  of  economic  condi- 
tions affecting  the  industry,  and  in  this  connection  some 
attention  had  been  given  to  the  study  of  mining  costs. 

Shortly  after  the  United  States  entered  the  war  it  be- 
came evident  that  power  should  be  given  the  administra- 
tion to  control  the  necessities  of  life,  primarily  food  and 
fuel.  With  this  in  view,  the  Lever  Act,  House  Bill  No. 
4961,  was  passed  by  the  Sixty-fifth  Congress  and  ap- 
proved by  the  President  on  August  10,  1917.  It  was 
officially  entitled  *^An  Act  to  Provide  further  for  the 
National  Security  and  Defense  by  Encouraging  the  Pro- 
duction, Conserving  the  Supply,  and  Controlling  the  Dis- 
tribution of  Food  Products  and  Fuels.''  Under  the  pro- 
^isions  of  this  Act  the  Fuel  Administration  was  set  up, 
and  after  some  preliminary  study  of  such  costs  as  were 
available  it  became  the  policy  of  the  administration  to  fix 
selling  prices  by  fields  upon  a  basis  of  cost,  plus  a  margin 
of  profit  fixed  by  the  Fuel  Administrator  above  a  bulk 

1 


2  BITUMINOUS  COAL  MINE  ACCOUNTING 

line,  which  included  the  major  portion  of  the  tonnage  of  a 
given  field  or  district. 

In  connection  with  the  study  of  costs  it  became  neces- 
sary that  they  be  ascertained  in  a  uniform  manner.  In 
furtherance  of  this  plan  the  Federal  Trade  Commission 
in  the  fall  of  1917  sent  out  a  blank  form  of  coal  cost  sheet 
to  bituminous  coal  operators  asking  for  a  return  of  costs 
for  the  year  1917  to  date  of  August  31.  This  form  was 
probably  the  first  attempt  to  secure  uniform  methods  of 
cost  accounting  for  the  industry,  and  became,  to  some 
extent  at  least,  the  basis  of  such  future  attempts  on  the 
part  of  governmental  agencies.  The  cost  sheets  thus  ob- 
tained were  turned  over  to  the  Engineers^  Committee  of 
the  United  States  Fuel  Administration  for  study,  and  the 
condition  existing  in  the  industry  is  well  illustrated  in 
the  report  of  the  Engineers'  Committee  of  the  United 
States  Fuel  Administration,  published  in  1919,  from 
which  the  following  quotation  is  made : 

Without  desiring  to  impugn  either  the  honesty  or  the  accuracy  of 
the  cost  sheets  as  presented,  it  was  found  essential  to  study  and  adjust 
them  for  use  as  a  basis  of  scientific  and  accurate  cost  finding.  Besides 
correcting  slips  and  palpable  mathematical  errors,  a  considerable 
amount  of  revision  was  necessary.  Many,  especially  of  the  small 
operators,  were  inexperienced  in  bookkeeping  and  submitted  cost  sheets 
which,  while  accurate  in  totals,  were  grievously  mixed  in  details. 

Supplies. — The  item  of  supplies  was  found  to  vary  so  widely  in  the 
same  mines  in  different  months  that  the  returns  for  single  months  were 
practically  abandoned,  and  the  figures  were  replaced  by  averages  from 
all  reports  available,  resulting  in  increases  or  deductions  from  the 
monthly  costs  as  reported. 

Reserves. — The  item  of  maintenance  was  frequently  misunderstood, 
in  some  instances  all  supplies  and  much  labor  being  charged  to  this 
account;  in  others  a  fixed  sum,  and  in  still  other  cases  nothing  at  all 
Avas  charged. 

Depreciation  was  often  put  in  as  a  guess;  in  some  cases  it  was 
f  i-ankly  stated  that  this  seemed  a  good  time  to  charge  off  improvements, 
and  such  were  charged  to  the  limit,  and  beyond. 

Depletion  of  lands  was  also  an  item  which  appeared  greatly  to 
trouble  some  of  the  accountants.  While  generally  understood,  many 
very  wild  guesses,  even  up  to  the  market  price  of  the  product,  were 


UNIFORM  ACCOUNTING  3 

found;  also,  many  instances  of  depletion  charges  for  lands  operated 
on  royalty  or  lease  and  not  the  property  of  the  operator. 

Contingent  funds  noted  on  the  blank  were  generally  omitted,  but  in  a 
few  cases,  especially  when  the  need  of  such  funds  had  recently  been 
felt,  most  ample  allowances  were  made.  After  being  considered,  it 
was  decided  to  apply  in  each  district  amounts  obtained  by  studying  the 
claims  of  the  better  operators  of  such  district,  after  obtaining,  from 
the  best  available  sources,  reliable  figures  as  to  the  cost  of  lands  and 
amount  and  value  of  improvements  characteristic  of  the  district. 

The  question  of  contmgent  reserves  is  a  serious  one.  From  a  strict 
cost-accounting  standpoint,  no  cost  can  be  permitted  until  incurred. 
Kevertheless,  such  reserves  are  essential  to  an  industry  involving  the 
great  risk  incident  to  coal  mining,  and  with  the  full  knowledge  that  such 
reserves  are  used  only  for  major  accidents  or  calamities,  and  that 
ordinaiy  losses  regularly  incurred  are  charged  to  the  cost  of  operation, 
it  was  decided  to  include  a  small  amount  for  contingent  reserve  in  the 
general  allowance. 

Salaries. — Executive  and  even  superintendent's  salaries  were  fre- 
quently omitted.  In  many  cases  of  personal  ownership,  undoubtedly 
none  were  paid.  It  was  considered  only  just  to  add  to  such  returns 
reasonable  allowances  for  salaries  to  place  such  reports  on  a  parity  with 
the  majority  of  the  operations  which  paid  for  such  necessary  service. 
On  the  other  hand,  occasional  instances  were  found  of  reported  salaries 
so  excessive  as  to  require  adjustment  downward  to  a  reasonable  parity 
with  the  general  practice  of  the  district. 

The  following  sliding  scale  of  salaries,  adjusted  within  broad  limits 
to  the  monthly  tonnage  of  an  operation,  was  finally  devised.  Reported 
salaries  between  these  limits  were  accepted  as  correct.  Those  salaries 
missing  or  below  the  minimum  were  raised  to  the  minimum,  and  those 
above  the  maximum  were  lowered  to  the  maximum. 

Salary  Memorandum  Used  by  the  Committee 


Monthly  tonnage 

Per  month 

rer  ton  per 
month 
cents 

1,000  and  under  . 

$150  to  $250 
160  to  400 
180  to  450 
200  to  480 
200  to  500 
250  to  600 
300  to  700 
400  to  800 
500  to  1,500 
750  to  2,250 

1,000  to  2,500 

15  up. 
8       to  20 

2,000                         

3,000 

6       to  15 

4,000                         

5       to  12 

5,000                         

4       to  10 

7,500                         

31/2  to     8 
3       to     7 

10,000                         

20,000                         

2       to     4 

50,000                         

1       to     3 

75,000                         

1       to     3 

100,000                                           .... 

1       to     2% 
V2  to     2 

Over  100,000              

4  BITUMINOUS  COAL  MINE  ACCOUNTING 

Special  Charges. — Special  charges  were  generally  treated  in  detail, 
often  spread  over  a  reasonable  time  rather  than  allowed  in  a  single 
month.  In  treating  these  a  careful  study  of  all  reports  available  was 
made. 

Special  Records. — The  Federal  Trade  Commission  had  required 
special  explanation  of  all  charges  out  of  the  ordinai-y,  and  all  these 
records  were  available  and  were  carefully  studied  and  had  great  in- 
fluence in  deciding  doubtful  points. 

Outside  Profits. — The  profits  from  farms,  dwellings,  or  stores  are 
not  properly  mining  profits,  and  accounts  of  these  should  be  kept  sepa- 
rate from  mining  expense.  Where  it  is  found  that  such  accounts  are 
separated,  no  deduction  for  such  profits  should  be  made,  but  where 
dwellings,  particularly,  are  so  intimately  connected  with  the  mining  that 
no  separation  is  possible,  it  is  proper  to  include  their  operation  with 
mining  accounts. 

Fuel  for  Power. — In  general,  charges  for  fuel  for  colliei'y  power 
were  allowed,  and  the  tonnage  divisor  was  made  to  include  such  fuel. 
In  the  opinion  of  the  committee  it  would,  however,  be  advisable  to 
eliminate  colliery  fuel  from  both  sides  of  the  account,  and  merely  to 
keep  a  record  of  the  amount  used.  By  this  method  the  tonnage  divisor 
represents  the  amount  shipped  and  sold,  and  is  susceptible  of  accurate 
determination,  while  the  fuel  used  is  approximated,  or  even  guessed  at, 
too  often  to  make  the  general  records  containing  this  item  reliable. 

Other  items  requiring  occasional  adjustment  were  the  inclusion  of 
washing  costs,  for  which  an  extra  charge  is  allowed,  in  the  mining  cost, 
and  the  inclusion  of  labor  and  supplies  used  in  coking  operations  con- 
ducted by  the  same  operators.  In  a  few  instances,  the  coke  tonnage, 
or  a  mixed  tonnage  of  coal  and  coke,  was  reported  and  used  as  a 
divisor  to  obtain  costs  per  ton,  resulting,  of  course,  in  a  notably  exces- 
sive cost. 

On  Jan.  1,  1918,  the  Federal  Trade  Commission  issued 
a  second  form  differing,  to  a  considerable  extent,  from 
the  form  prepared  by  them  during  the  year  1917.  Costs 
were  collected  by  the  Federal  Trade  Commission  from 
the  coal  producers  on  the  basis  of  this  report  during  the 
calendar  year  1918,  and  these  costs  as  revised  by  the  En- 
gineers' Committee  of  the  United  States  Fuel  Adminis- 
tration were  the  basis  of  the  revised  prices  granted  by 
the  Fuel  Administrator  during  the  period  in  which  the 
prices  were  under  the  control  of  the  government. 

With  the  beginning  of  the  year  1919  the  Federal  Trade 


UNIFORM  ACCOUNTING  5 

Commission  prepared  a  third  form  much  more  elaborate 
than  those  which  had  preceded  it.  This  form  was,  in  the 
opinion  of  coal  operators  and  accountants  who  had  made 
a  study  of  coal  costs,  absolutely  unworkable  as  a  practical 
proposition  because  of  the  vexatious  refinements  of  detail 
into  which  the  items  of  cost  were  sub-divided.  Failure  of 
the  Congress  to  make  a  sufficient  appropriation  for  the 
Commission  to  carry  on  this  work,  coupled  with  the  op- 
position raised  by  the  operators  and  the  veto  of  the  Engi- 
neers'  Committee  of  the  United  States  Fuel  Administra- 
tion, resulted  in  the  failure  to  introduce  this  form,  and 
during  the  year  1919  no  coal  costs  were  collected  by  this 
agency  of  the  government. 

On  Jan.  1,  1920,  the  Federal  Trade  Commission  issued 
a  fourth  form  embodying  some  of  the  features  of  the  pre- 
ceding ones,  but  very  much  abridged,  and  containing  sev- 
eral departures  from  the  preceding  forms  prepared  by 
the  Federal  Trade  Commission.  Careful  study  of  this 
form  by  accountants  in  the  coal  mining  industry  devel- 
oped a  strong  objection  to  some  of  its  features.  To  test 
the  right  of  the  Commission  to  require  reports  from  coal 
operators  in  a  form  which  practically  meant  the  regula- 
tion of  the  manner  of  keeping  books  on  the  part  of  the 
coal  industry,  an  injunction  suit  was  instituted  by  the 
Maynard  Coal  Company  asking  the  court  to  restrain  the 
Federal  Trade  Commission  from  requiring  such  reports. 
This  injunction  suit  was  instituted  only  after  conferences 
between  representatives  of  the  coal  industry  and  the 
Federal  Trade  Commission  in  which  it  was  apparent 
that  the  viewpoints  of  the  industry  and  of  the  Federal 
Trade  Commission  could  not  be  harmonized.  The  case 
was  argued  before  Justice  Bailey  in  the  Supreme  Court 
of  the  District  of  Columbia  and  an  injunction  was  issued, 
and  to  date  of  this  writing  the  case  has  not  been  vacated. 
On  motion  of  the  Federal  Trade  Commission  this  case 
came  up  before  Justice  Bailey  on  June  22,  1922,  for  argu- 
ment as  to  the  issuance  of  a  permanent  injunction.    After 


6  BITUMINOUS  COAL  MINE  ACCOUNTING 

argument  the  justice  took  the  matter  under  advisement. 
In  the  Claire  Furnace  Company  case  in  which  the  same 
questions  are  raised,  Justice  Bailey  made  the  order  per- 
manent and  the  Federal  Trade  Commission  has  appealed 
to  the  higher  courts. 

The  opinion  of  the  judge  who  granted  the  injunction  is 
important  because  of  its  bearing  on  other  lines  of  indus- 
try. The  opinion  of  Justice  Bailey  follows:  The  sub- 
headings are  mine. 

This  is  an  application  for  an  injunction  to  restrain  the  Federal  Trade 
Commission  from  taking  steps  to  collect  a  penalty  for  failure  on  the 
part  of  the  plaintiff,  The  Maynard  Coal  Company,  to  make  certain 
reports  called  for  by  the  Commission.  The  bill  is  supported  by  several 
affidavits  of  expert  accountants.  The  defendant  Commission  has  filed 
its  answer,  but  on  account  of  insufficient  verification,  it  cannot  be 
treated  as  an  affidavit.  It  has  also  filed  with  its  answer  several  affi- 
davits, which  will  be  noticed  hereafter. 

The  plaintiff  is  a  corporation  engaged  in  the  mining,  production  and 
sale  of  bituminous  coal.  It  owns  and  operates  mines  in  Kentucky  and 
Ohio.  Practically  all  of  the  coal  mined  in  Kentucky  and  about  one- 
half  of  the  coal  mined  in  Ohio  is  shipped  to  points  without  those 
States,  and  the  remainder  of  that  mined  in  Ohio  to  points  in  that 
State. 

Plaintiff's  Claim. — On  January  31,  1920,  the  defendant  Commis- 
sion served  upon  a  large  number  of  coal-mining  corporations,  including 
the  plaintiff,  an  order  requiring  them  to  report  "monthly  costs  of  pro- 
duction and  other  data,"  as  set  out  in  specification  accompanying  the 
order,  for  each  calendar  month  of  the  year  1920  and  until  further 
notice.  The  information  and  reports  required  are  very  full  and  de- 
tailed as  to  production,  sales,  management,  financial  condition,  deprecia- 
tion, etc.,  and  all  to  be  calculated  as  prescribed  in  the  specifications. 
The  plaintiff  claims,  and  from  the  affidavits  filed  such  appears  to  be 
the  fact,  these  reports  cannot  be  made  without  a  large  change  in  the 
plaintiff's  method  of  bookkeeping  and  accounting,  and  at  a  very  con- 
siderable expense. 

Commission's  Claim. — The  Commission  claims  that  it  may  require 
these  reports  under  the  authority  placed  in  it  by  the  act  of  Congress 
creating  the  Commission  approved  September  26,  1914,  and  that  Con- 
gress has  the  authority  to  so  empower  the  defendant  under  the  clause, 
known  as  the  Commerce  Clause  of  the  Constitution  of  the  United 
States : 


UNIFORM  ACCOUNTING  7 

"Congress  shall  have  power  ...  to  regulate  commerce  with  foreign 
nations  and  among  the  several  States  with  the  Indian  Tribes." 

The  parts  of  the  Federal  Trade  Commission  Act  pertinent  to  this 
inquiry  are  substantially  as  follows: 

Commerce  is  defined,  Section  4,  as  "commerce  among  the  several 
States  or  with  foreign  nations,  or  in  any  Territory  of  the  United  States 
or  with  foreign  nations,  or  between  any  such  Territory  and  another,  or 
between  any  such  Territory  and  any  State  or  foreign  nation,  or  be- 
tween the  District  of  Columbia  and  any  State  or  Territory  or  foreign 
nation." 

Section  5  provides  that  unfair  methods  of  competition  in  commerce 
shall  be  unlawful,  and  empowers  the  Commission  to  take  steps  to  pre- 
vent such  unfair  methods  and  prescribes  the  procedure  for  carrying 
out  such  purpose. 

Section  6  of  the  act  provides:  "That  the  Commission  shall  have 
power — 

"a.  To  gather  and  compile  information  concerning,  and  to  investi- 
gate from  time  to  time  the  organization,  business,  conduct,  practices, 
and  management  of  any  corporation  engaged  in  commerce,  excepting 
banks  and  common  carriers  subject  to  the  act  to  regulate  commerce, 
and  its  relations  to  other  corporations  and  to  individuals,  associations, 
and  partnerships. 

"b.  To  require,  by  general  or  special  orders,  corporations  engaged 
in  commerce,  excepting  banks,  and  common  carriers  subject  to  the  act, 
to  regulate  commerce,  or  any  class  of  them,  or  any  of  them,  respectively, 
to  file  with  the  Commission  in  such  form  as  the  Commission  may  pre- 
scribe, annual  or  special,  or  both  annual  and  special,  reports  or  answers 
in  writing  to  specific  questions,  furnishing  to  the  Commission  such 
information  as  it  may  require  as  to  the  organization,  business,  conduct, 
practices,  management,  and  relation  to  other  corporations,  partnerships, 
and  individuals  of  the  respective  corporations  filing  such  reports  or 
answers  in  writing.  Such  reports  and  answers  shall  be  made  under 
oath,  or  otherwise,  as  the  Commission  may  prescribe,  and  shall  be  filed 
with  the  Commission  within  such  reasonable  time  as  the  Commission 
may  prescribe,  unless  additional  time  be  granted  in  any  case  by  the 
Commission." 

Subsection  "c"  authorizes  the  Commission,  when  a  final  decree  has 
been  entered  against  a  corporation  under  the  Anti-Trust  Acts,  to  in- 
vestigate the  manner  in  which  the  decree  is  being  carried  out. 

Subsection  "d"  authorizes  the  Commission,  upon  direction  of  the 
President  of  either  house  of  Congress,  to  investigate  alleged  violations 
of  the  Anti-Trust  Acts. 

"f.  To  make  public  from  time  to  time  such  portions  of  the  informa- 
tion obtained  by  it  hereunder,  except  trade  secrets  and  names  of  cus- 


8  BITUMINOUS  COAL  MINE  ACCOUNTING 

tomers,  as  it  shall  deem  expedient  iii  the  public  interest;  and  to  make 
annual  and  special  reports  to  the  Congress  and  to  submit  therewith 
recommendations  for  additional  legislation;  and  to  provide  for  the 
publication  of  its  reports  and  decisions  in  such  form  and  manner  as 
may  be  best  for  public  information  and  use. 

"g.  From  time  to  time  to  classify  corporations  and  to  make  rules 
and  regulations  for  the  purpose  of  carrying  out  the  provisions  of  this 
act. 

"h.  To  investigate,  from  time  to  time,  trade  conditions  in  and  with 
foreign  countries  where  associations,  combinations  or  practices  of 
manufacturers,  merchants,  or  traders,  or  other  conditions,  may  affect 
the  foreign  trade  of  the  United  States,  and  to  report  to  Congress 
thereon,  with  such  recommendations  as  it  deems  advisable." 

The  defendant  in  its  answer  admits  "that  no  complaint  has  been  filed 
by  or  before  it  charging  the  plaintiff  with  unfair  methods  of  competi- 
tion or  with  the  violation  of  the  Federal  Trade  Commission  Act  or  the 
Anti-Trust  Acts  and  admits  that  the  information  sought  to  be  secured 
from  the  plaintiff  may  not  throw  any  light  or  have  any  bearing  upon 
any  possible  violation  of  any  of  the  acts  aforesaid,  but  asserts  that 
such  information  is  sought  for  a  lawful  purpose  within  the  scope  of  the 
powers  conferred  upon  the  defendant  by  Section  6  of  the  said  Com- 
mission Act. 

The  authority  of  Congress  to  enact  this  legislation  is  claimed  under 
the  power  to  regulate  commerce  above  set  out.  The  reports  demanded 
of  the  plaintiff  are  not  limited  to  questions  connected  with  the  ship- 
ment of  coal  in  interstate  commerce  or  the  contracts  in  reference  to,  or 
the  prices  of  coal  so  shipped,  but  relate  almost  entirely  to  the  mining 
of  coal  and  the  price  at  which  it  is  sold,  and  the  financial  condition  and 
operations  of  the  company,  and  all  without  any  attempt  to  limit  the 
inquiry  to  matters  pertaining  to  the  coal  shipped  in  interstate  com- 
merce. 

In  fact,  the  Commission  in  its  answer  "denies  that  the  plaintiff  has 
the  right  to  segregate  its  business  and  to  say  that  part  of  its  business 
is  interstate  and  part  is  intrastate,  but  in  order  to  ascertain  if  de- 
fendant is  engaged  in  commerce,  the  courts  will  look  to  the  entire  busi- 
ness transactions  of  the  plaintiff,  and  if  any  part  of  its  business  is 
intrastate  and  a  part  interstate  and  the  whole  business  is  conducted 
under  one  organization,  as  is  set  forth  and  admitted  in  the  plaintiff's 
bill,  then  the  defendant  insists  that  the  plaintiff,  considering  its  busi- 
ness as  a  whole  (is  engaged  in)  interstate  commerce  and  the  defendant 
has  the  right  to  ask  the  information  sought. 

And  the  information  sought  in  this  case  is  such  as  would  apply 
as  well  to  a  corporation  whose  business  was  wholly  intrastate  as  to  the 
plaintiff.     The  defendant  unquestionably  is  demanding  information  as 


UNIFORM  ACCOUNTING  9 

to  intrastate  commerce  and  as  to  coal  production,  and  frankly  asserts 
the  right  to  do  so." 

That  there  is  a  radical  distinction  between  production  and  commerce 
is  clear. 

In  Kidd  vs  Pearson,  128  U.  S.  1,  Mr.  Justice  Lamar  said,  page  20 : 

"Manufacture  is  transformation — the  fashioning  of  raw  materials 
into  a  change  of  form  for  use.  The  functions  of  commerce  are  different. 
The  bujdng  and  selling  and  the  transportation  incidental  thereto  con- 
stitute commerce;  and  the  regulation  of  commerce  in  the  constitutional 
sense  embraces  the  regulation  at  least  of  such  transportation.  The 
legal  definition  of  the  tenn,  as  given  by  this  court  in  County  of  Mobile 
vs  Kimball,  102  U.  S.  691,  702,  is  as  follows:  'Commerce  with  foreign 
countries  and  among  the  States,  strictly  considered,  consists  in  inter- 
course and  traffic,  including  in  these  terms  navigation,  and  the  trans- 
portation and  transit  of  persons  and  property,  as  well  as  purchase, 
sale,  and  exchange  of  commodities.'  If  it  be  held  that  the  term  in- 
cludes the  regulation  of  all  such  manufactures  as  are  intended  to  be 
the  subject  of  commercial  transactions  in  the  future,  it  is  impossible 
to  deny  that  it  would  include  all  productive  industries  that  contemplate 
the  same  thing.  The  result  would  be  that  Congress  would  be  invested, 
to  the  exclusion  of  the  States,  with  the  power  to  regulate,  not  only 
manufactures,  but  also  agriculture,  horticulture,  stock  raising,  domestic 
fisheries,  mining — in  short,  every  branch  of  human  industry.  For  is 
there  one  of  them  that  does  not  contemplate,  more  or  less  clearly,  an 
interstate  or  foreign  market?  Does  not  the  wheat  grower  of  the 
Northwest,  and  the  cotton  planter  of  the  South,  plant,  cultivate,  and 
harvest  his  crop  with  an  eye  on  the  prices  at  Liverpool,  New  York,  and 
Chicago?  The  power  being  vested  in  Congress  and  denied  to  the 
States,  it  would  follow  as  an  inevitable  result  that  the  duty  would 
devolve  on  Congress  to  regulate  all  of  these  delicate,  multiform,  and 
vital  interests — interests  which  in  their  nature  are  and  must  be,  local 
in  all  the  details  of  their  successful  management." 

In  United  States  vs  Knight,  156  U.  S.  1,  page  12,  Mr.  Chief  Justice 
Fuller  said : 

"Doubtless  the  power  to  control  the  manufacture  of  a  given  thing 
involves  in  a  certain  sense  the  control  of  its  disposition,  but  this  is  a 
secondary  and  not  the  primary  sense;  and  although  the  exercise  of  that 
power  may  result  in  bringing  the  operation  of  commerce  into  play,  it 
does  not  control  it,  and  affects  it  only  incidentally  and  indirectly. 
Commerce  succeeds  to  manufacture  and  is  not  a  part  of  it." 

In  Addyston  Pipe  &  Steel  Co.  vs  United  States,  175  U.  S.  211,  which 
involves  the  Anti-Trust  Act  of  July  2,  1890,  Mr.  Justice  Peckham,  after 
holding  that  Congress  under  the  power  to  regulate  interstate  coromerce 
could  not  regulate  any  agreement  on  combination  that  operated  upon 


10  BITUMINOUS  COAL  MINE  ACCOUNTING 

the  sale,  transportation  and  delivery  of  an  article  of  interstate  com- 
merce, on  page  27,  said: 

"Although  the  jurisdiction  of  Congress  over  commerce  among  the 
States  is  full  and  complete,  it  is  not  questioned  that  it  has  none  over 
that  which  is  wholly  within  a  state,  and  therefore  none  over  combina- 
tions or  agreements  so  far  as  they  relate  to  a  restraint  of  such  trade 
or  commerce.  It  does  not  acquire  any  jurisdiction  over  that  part  of  a 
combination  or  agreement  which  relates  to  commerce  wholly  within  a 
State,  by  reason  of  the  fact  that  the  combination  also  covers,  and 
regulates  commerce  which  is  interstate.  The  latter  it  can  regulate, 
while  the  former  is  subject  alone  to  the  jurisdiction  of  the  State.  The 
combination  herein  described  covers  both  commerce  which  is  wholly 
within  a  State  and  also  that  which  is  interstate. 

"In  regard  to  such  of  these  defendants  as  might  reside  and  carry  on 
business  in  the  same  State  where  the  pipe  provided  for  in  any  particu- 
lar contract  was  to  be  delivered,  the  sale,  transportation  and  delivery 
of  the  pipe  by  them  under  that  contract  would  be  a  transaction  wholly 
within  the  State,  and  the  statute  would  not  be  applicable  to  them  in 
that  case.  They  might  make  any  combination  they  chose  with  reference 
to  the  proposed  contract,  although  it  should  happen  that  some  non- 
resident of  the  State  eventually  obtained  it." 

In  Delaware,  L^ackawanna  d:  Western  Railroad  Co.  vs  Yurkonia,  238 
U.  S.  439,  a  case  involving  the  Federal  Employers'  Liability  Act,  Mr. 
Justice  Day,  page  444,  said: 

"The  averments  of  the  complaint  as  to  the  manner  of  the  receiving 
of  the  injury  by  plaintiff  showed  conclusively  that  it  did  not  occur  in 
interstate  commerce.  The  mere  fact  that  the  coal  might  be  or  was 
intended  to  be  used  in  the  conduct  of  interstate  commerce  after  the 
same  was  mined  and  transported  did  not  make  the  injury  one  received 
by  the  plaintiff  while  he  was  engaged  m  interstate  commerce.  The 
injury  happening  when  the  plaintiff  was  preparing  to  mine  the  coal 
was  not  an  injury  happening  in  interstate  commerce,  and  the  defendant 
was  not  then  carrying  on  interstate  commerce  facts  essential  to  recovery 
under  the  Employers'  Liability  Act." 

In  Coe  vs  Errol,  116  U.  S.  517,  it  was  held  that  logs  cut  in  New 
Hampshire  and  hauled  to  Errol,  N.  H.,  to  be  transported  to  Maine 
were  not  in  interstate  commerce.    Mr.  Justice  Bradley,  page  525,  said : 

"When  the  products  of  the  farms  or  forest  are  collected  and  brought 
in  from  the  surrounding  country  to  a  town  or  station  serving  as  an 
entrepot  for  that  particular  region,  whether  on  a  river  or  a  line  of 
railroad,  such  products  are  not  yet  exports,  nor  are  they  in  process  of 
exportation,  nor  is  exportation  begun  until  they  are  committed  to  the 
common  carrier  for  transportation  out  of  the  State  to  the  State  of 
their  destination,  or  have  started   on  their  ultimate   passage   to   that 


UNIFORM  ACCOUNTING  11 

State.  Until  then  it  is  reasonable  to  regard  them  as  not  only  within 
the  State  of  their  origin,  but  as  a  part  of  the  general  mass  of  property 
of  that  State,  subject  to  its  jurisdiction,  and  liable  to  taxation  there, 
if  not  taxed  by  reason  of  their  being  intended  for  transportation,  but 
taxed  without  any  discrimination,  in  the  usual  way  and  manner  in  which 
such  property  is  taxed  in  the  State." 

On  page  528,  he  said: 

"It  is  true,  it  was  said  in  the  case  of  the  Daniel  Ball,  10  Wall,  557, 
565 :  'Whenever  a  commodity  has  begun  to  move  as  an  article  of  trade 
from  one  State  to  another,  commerce  in  that  commodity  between  the 
States  has  commenced.  But  this  movement  does  not  begin  until  the 
articles  have  been  shipped  or  started  for  transportation  from  the  one 
State  to  the  other.  The  carrying  of  them  in  carts  or  other  vehicles,  or 
even  floating  them,  to  the  depot  where  the  journey  is  to  commence  is 
no  part  of  the  journey.  That  is  all  preliminary  work,  performed  for 
the  purpose  of  putting  the  property  in  a  state  of  preparation  and 
readiness  for  transportation.  Until  actually  launched  on  its  way  to 
another  State,  or  committed  to  a  common  carrier  for  transportation  to 
such  State,  its  destination  is  not  fixed  and  certain.  It  may  be  sold 
or  otherwise  disposed  of  within  the  State,  and  never  put  in  course  of 
transportation  out  of  the  State.  Carrying  from  the  farm  or  forest, 
to  the  depot,  is  only  an  interior  movement  of  the  property,  entirely 
within  the  State,  for  the  purpose,  it  is  true,  but  only  for  the  purpose, 
of  putting  it  into  a  course  of  exportation ;  it  is  no  part  of  the  exporta- 
tion itself.  Until  shipped  or  started  on  its  final  journey  out  of  the 
State  it  is  a  matter  altogether  in  fieri,  and  not  at  all  a  fixed  and  certain 
thing." 

In  order  for  the  Federal  Trade  Commission  to  have  the  power  to 
require  the  plaintiff  to  make  reports  as  to  the  mining  of  coal  and  as 
to  its  intrastate  shipments,  it  must  appear  that  this  information  is 
necessary  to  or  connected  with  some  subject  over  which  the  general 
government  has  power.  There  is  no  claim  made  that  there  is  any  pro- 
ceeding pending,  involving  the  Anti-Trust  Act,  or  unfair  methods  of 
competition,  or  under  the  Clayton  Act,  but  in  its  order  defendant  de- 
mands reports  in  all  the  business  of  the  plaintiff. 

The  defendant  relies  upon  the  visitorial  powers  of  Congress  over 
corporations.  In  this  connection  it  must  be  borne  in  mind  that  the 
power  of  Congress  over  an  instrumentality  of  commerce,  such  as  a 
common  carrier,  is  far  different  from  its  powers  over  an  ordinary 
business  corporation  which  merely  ships  its  products  or  a  portion  of 
its  products  over  such  carrier.  In  fact,  as  said  by  Mr.  Justice  Holmes 
in  Smith  vs  Interstate  Commerce  Commission,  245  U.  S.  33,  on  page  45, 
"It  is  not  far  from  true — it  may  be  it  is  entirely  true,  as  said  by  the 
Commission   (referring  to  the  Interstate  Commerce  Commission) — that 


12  BITUMINOUS  COAL  MINE  ACCOUNTING 

there  can  be  nothing  private  or  confidential  in  the  activities  and  ex- 
penditures of  a  caiTier  engaged  in  interstate  commerce." 

Powers  of  Congress. — Apart  from  the  fact  that  plaintiff  is  a  cor- 
poration, it  is  clear  that  Congress  could  not  compel  the  production  of 
the  private  books  and  papers  of  a  citizen,  except  in  the  progress  of 
judicial  proceedings. 

Kilbourne  vs  Thompson,  103  U.  S.  168, 

Harriman  vs  Interstate  Commerce  Commission,  211  U.  S.  407. 

Mr.  Justice  Field  then  sitting  on  the  Circuit  Court,  in  the  case  of 
In  re  Pacific  Railway   Commission,   32   Federal   Reporter   241,   said: 

"And  in  addition  to  the  inquiries  usually  accompanying  the  taking 
of  a  census,  there  is  no  doubt  that  Congress  may  authorize  a  commis- 
sion to  obtain  information  upon  any  subject  which,  in  its  judgment, 
it  may  be  important  to  possess.  It  may  inquire  into  the  extent  of  the 
productions  of  the  country  of  every  kind,  natural  and  artificial,  and 
seek  information  as  to  the  habits,  business,  and  even  amusements  of 
the  people.  But  in  its  inquiries  it  is  controlled  by  the  same  guards 
against  the  invasion  of  private  rights  which  limit  the  investigations  of 
private  parties  into  similar  matters.  In  the  pursuit  of  knowledge  it 
cannot  compel  the  production  of  the  private  books  and  papers  of  the 
citizen  for  its  inspection,  except  in  the  progress  of  judicial  proceedings, 
or  in  suits  instituted  for  that  purpose,  and  in  both  cases  only  upon 
averments  that  its  rights  are  in  some  way  dependent  for  enforcement 
upon  the  evidence  these  books  and  papers  contain." 

(And  again  on  page  254)  : 

"But  in  accordance  with  the  principles  declared  in  the  case  of  Kil- 
bourne vs  Thompson,  and  the  equally  important  doctrines  announced 
in  Boyd  vs  United  States,  the  commission  is  limited  in  its  inquiries  as 
to  the  interest  of  these  directors,  officers  and  employees  in  any  other 
business,  company  or  corporation,  or  to  such  matters  as  these  persons 
may  choose  to  disclose.  They  cannot  be  compelled  to  open  their  books, 
and  expose  such  business  to  the  inspection  and  examination  of  the 
Commission.  They  were  not  prohibited  from  engaging  in  any  other 
lawful  business  because  of  their  interest  in  and  connection  with  the 
Central  Pacific  Railway  Company,  and  that  other  business  might  as 
well  be  the  construction  and  management  of  other  railroads  as  the 
planting  of  vines,  or  the  raising  of  fruit,  in  which  some  of  these 
directors  and  officers  and  employees  have  been  in  fact  engaged.  And 
they  are  entitled  to  the  same  protection  and  exemption  from  inquisi- 
torial investigation  into  such  business  as  any  other  citizen  engaged  in 
like  business." 

But  the  Conmaission  claims  that,  inasmuch  as  the  plaintiff  is  a  cor- 
poration, it  has  the  authority  claimed  under  the  visitorial  power  of 
Congress.     That  the  power  sought  is  visitorial  in  its  nature  is  clear. 


UNIFORM  ACCOUNTING  13 

For  in  order  to  give  the  information  and  make  the  reports  required,  it 
will  be  necessary  (that  it  is,  so  appears  from  the  affidavits  on  file) 
for  the  plaintiff  to  keep  records  and  books  in  addition  to  those  now 
kept  by  it  and  by  other  corporations  engaged  in  a  like  business,  at  a 
considerable  expense,  and  to  make  monthly  reports  based  on  calcula- 
tions made  from  such  records.  This  is  not  the  simple  obligation  of  a 
witness  under  a  subpoena  duces  tecum,  to  answer  questions  and  to  pro- 
duce books  and  records  for  inspection,  but  in  addition  to  keep  records 
and  make  calculations  and  reports.  Such  a  burden  cannot  be  imposed 
upon  an  ordinary  witness. 

Northern  Pacific  Railway  Co.  vs  Keyes,  91  Federal  Reporter  47. 
4  Wigmore  No.  2203,  page  2969. 

The  Commission  contends  that  the  order  served  upon  the  plaintiff 
does  not  undertake  to  prescribe  methods  of  bookkeeping,  nor  to  keep 
additional  records,  but  under  the  allegations  of  the  bill  and  the  affidavits 
filed,  I  am  of  the  opinion  that  this  contention  cannot  be  sustained.  The 
plaintiff  cannot  comply  with  the  orders  of  the  Commission  without 
changing  its  methods  of  bookkeeping. 

That  the  Act  undertakes  to  vest  such  powers  (certainly  as  to  matters 
connected  with  interstate  commerce)  in  the  Commission  is  clear  from 
Section  10  of  the  Act  which  provides  penalties  for  any  person  who 
shall  willfully  "neglect  or  fail  to  make  or  cause  to  be  made,  any  false 
entry  in  any  account,  records  or  memorandum  kept  by  any  corporation 
subject  to  this  act,  or  who  shall  willfully  neglect  or  fail  to  make  full, 
true  and  correct  entries  in  such  accounts,  records  or  memoranda  of  all 
facts  and  transactions  appertaining  to  the  business  of  such  corpora- 
tion."    These  powei*s  could  only  be  justified  under  visitorial  power. 

It  has  been  held  that  Congress  has  such  visitorial  power  over  cor- 
porations engaged  in  interstate  commerce  in  Wilson  vs  United  States, 
221  U.  S.  361,  and  in  Ellis  vs  Interstate  Commerce  Commission,  237 
U.  S.  434,  but  in  these  cases  the  power  was  limited  to  that  portion  of 
the  business  which  was  under  the  control  of  the  Federal  Government. 

No  such  power  would  seem  to  exist,  however,  as  to  other  matters, 
and  the  two  cases  referred  were  cases  in  which  subpoena  duces  tecum 
has  been  issued,  requiring  the  production  of  a  corporation's  books  in 
the  one  case  before  a  grand  juiy  investigating  charges  of  fraudulent 
use  of  the  mail  and  in  the  other  before  the  Interstate  Commerce  Com- 
mission. And  in  the  latter  case  the  Court,  through  Mr.  Justice  Holmes, 
on  page  444  (237  U.  S.)  said: 

"If  the  price  paid  to  the  Armour  Car  Lines  was  made  the  cover  for 
a  rebate  to  Armour  &  Co.,  or  if  better  cars  were  given  to  Armour 
&  Co.  than  to  others,  or  if,  in  short,  the  act  was  violated,  the  railroads 
are  responsible  on  proof  of  the  act.  But  the  only  relation  that  is 
subject  to  the  Commission  is  that  between  the  railroads  and  the  ship- 


14  BITUMINOUS  COAL  MINE  ACCOUNTING 

pers.  It  does  not  matter  to  the  responsibility  of  the  roads  whether 
they  own  or  simply  control  the  facilities,  or  whether  they  pay  a  greater 
or  less  price  to  their  lessor.  It  was  argued  that  the  Commission  might 
look  into  the  profits  and  losses  of  the  Annour  Car  Lines  (one  of  the 
matters  inquired  about)  in  order  to  avoid  fixing  allowances  to  it  at  a 
confiscatory  rate.  But  the  Commission  fixes  nothing  as  to  the  Armour 
Car  Lines  except  under  No.  15  in  the  event  of  which  we  shall  speak." 

"The  appellant's  refusal  to  answer  the  series  of  questions  put  was 
not  based  upon  any  objection  to  giving  much  of  the  information  sought, 
but  on  the  ground  that  the  counsel  who  put  them  avowed  that  they 
were  the  beginning  of  an  attempt  to  go  into  the  whole  business  of  the 
Armour  Car  Lines — a  fishing  expedition  into  the  affairs  of  a  stranger 
for  the  chance  that  something  discreditable  might  turn  up.  This  was 
beyond  the  powers  of  the  Commission.  In  re  Pacific  Railway  Com- 
mission, 32  Federal  Reporter  241.  Interstate  Commerce  Commission 
vs  Brimson,  154  U.  S.  447,  478,  479.  Harriman  vs  Interstate  Com- 
merce Commission,  211  U.  S.  407.  The  Armour  Car  Lines  not  being 
subject  to  regulation  by  the  Commission,  its  position  was  simply  that 
of  a  witness  interested  in  but  a  stranger  to  the  inquiry,  and  the  Com- 
mission could  not  enlarge  its  powers  by  making  the  company  a  party 
to  the  proceedings  and  serving  it  with  notice.  Therefore  the  matter 
to  be  considered  here,  subject  to  the  qualification  that  we  are  about  to 
state,  is  how  far  an  ordinary  witness  could  be  required  to  answer  the 
questions  that  are  before  the  Court." 

In  the  case  of  a  corporation  doing  a  wholly  intrastate  business,  could 
it  be  said  that  Congress  had  any  visitorial  power  under  the  Commerce 
Clause  of  the  Constitution  of  the  United  States?  Clearly  it  has  not. 
The  fact  that  it  happens  to  be  the  same  corporation  in  this  instance 
which  mines  and  ships  the  coal  does  not  give  Congress  any  greater 
powers  to  regulate  production  and  the  intrastate  commerce  of  such 
corporation. 

The  visitorial  power  of  Congress  is  limited  to  that  part  of  the  busi- 
ness over  which  it  has  control,  and  which  under  the  Constitution  it  has 
the  power  to  regulate. 

In  Hammer  vs  Dagenhart,  247  U.  S.  251,  it  is  said  (page  260)  : 

"While  the  power  to  regulate  commerce  among  the  several  States  is 
in  the  same  grant  and  in  the  same  terms  with  the  power  over  foreign 
commerce,  yet  there  is  a  difference  with  respect  to  the  extent  of  that 
power  gTowing  out  of  the  difference  in  the  relation  of  the  United 
States  to  the  two  kinds  of  commerce,  and  the  difference  in  the  right  of 
the  citizen  of  the  United  States  and  the  foreigner  to  engage  therein. 
As  to  foreign  commerce,  the  United  States  possesses  and  exercises  all 
the  attributes  of  sovereignty.  As  to  interstate  commerce,  it  exercises 
only  that  portion  of  sovereignty  delegated  to  it." 


UNIFORM  ACCOUNTING  15 

(And  again,  page  261)  : 

"However  much  the  Knight  ease,  156  U.  S.  1,  may  be  weakened  by 
later  decisions,  its  distinction  between  production  and  commerce  is  still 
effective  to  prevent  direct  congressional  regulation  of  production  as 
distinguished  from  sale  and  transportation." 

The  power  claimed  by  the  Commission  is  vast  and  unprecedented. 
The  mere  fact  that  a  corporation  engaged  in  mining,  ships  a  portion 
of  its  product  to  other  States  does  not  subject  its  business  of  produc- 
tion or  its  intrastate  commerce  to  the  powers  of  Congress. 

Doubtless  the  business  of  every  coal-mining  corporation,  whether 
engaged  in  interstate  business  or  not,  to  some  extent  affects  interstate 
prices  and  commerce,  but,  as  stated  in  United  States  vs  King,  156  U. 
S.  1  (above),  "The  power  to  control  the  manufacture  of  a  given  thing 
involves  in  a  certain  sense  the  control  of  its  disposition,  but  this  is  a 
secondary  and  not  the  primary  sense." 

No  sound  reason  is  given  why  there  is  any  difference  in  the  business 
of  coal  mining  of  a  corporation  which  ships  its  coal  to  another  State 
and  that  of  a  corporation  which  does  not.  Interstate  commerce  is  not 
affected  any  more  in  the  one  case  than  in  the  other. 

Concerning  Search  and  Seizure. — In  the  case  of  United  States 
vs  Basic  Products  Co.,  260  Federal  Reporter  472,  in  which  it  was  urged 
that  Section  6  of  this  act  was  unconstitutional,  not  only  in  so  far 
as  it  authorized  investigation  and  compulsory  disclosure  of  matters 
which  are  beyond  the  commercial  powers  of  Congress,  but  also  in  so 
far  as  it  attempted  to  authorize  a  search  or  seizure  by  an  administra- 
tive agency  of  the  Government  without  charge  or  suspicion,  Justice 
Orr  of  the  District  Court  of  the  Western  District,  Pennsylvania,  said: 

"While  the  contention  of  counsel  is  probably  sound,  this  Court  does 
not  deem  it  necessary  to  go  further  than  to  hold  that  the  Commission 
has  not  the  power  to  carry  on  investigations  which  it  has  assumed  in 
the  present  case." 

In  the  same  decision  he  also  said: 

"Imagination,  if  not  experience,  can  suggest  that  persons,  partner- 
ships, and  corporations  may  be  engaged  in  interstate  commerce  by 
the  transportation  of  merchandise  solely  by  water;  that  their  activities 
may  give  them  their  income  from  lighterage;  or  they  may  be  engaged 
in  the  sole  business  of  forwarding  goods,  with  no  interest  in  the  vessels 
or  wagons  on  which  they  are  transported.  The  foregoing  are  merely 
the  illustrations  of  activities  which  may  perhaps  be  within  the  scope  of 
the  powers  gi-anted  to  the  Commission  by  the  act  as  found  in  the  fifth 
section  thereof." 

"Imagination,  however,  cannot  suggest  such  an  extension  of  consti- 
tutional limitation  as  may  justify  the  investigation  undertaken  by  the 
Commission  in  this  case.    Indeed,  so  far  as  it  has  been  brought  to  the 


16  BITUMINOUS  COAL  MINE  ACCOUNTING 

attention  of  the  Court  no  such  assertion  of  power  has  ever  been  made 
to  the  courts.  Investigation  under  subdivision  'a/  section  6,  is  limited 
to  corporations  engaged  in  interstate  commerce.  The  defendant  is  en- 
gaged in  manufacture." 

I  am  of  the  opinion,  therefore,  that  no  such  visitorial  power  as  that 
claimed  by  the  Commission  in  the  instant  case  has  been  vested  in  Con- 
gress by  the  Constitution,  nor  could  Congress  delegate  such  power  to 
the  Commission. 

But  did  Congress  undertake  to  vest  such  power  in  the  Commission? 
It  is  the  duty  of  the  courts,  if  possible,  to  give  the  statute  a  construction 
which  would  not  conflict  with  the  Constitution. 

Knight  Templar  Co.  vs  Jarman,  187  U.  S.  197,  205. 

The  corporations  referred  to  in  the  Act  are,  by  its  terms,  limited 
to  those  engaged  in  "commerce"  as  defined  in  the  Act,  and  all  the 
powers  vested  in  the  Commission  should  be  and  it  seems  may  be  con- 
strued wdth  this  limitation. 

But  the  Commission  has  undertaken  to  construe  the  Act  otherwise, 
and  to  take  steps  under  its  construction  of  the  Act  to  require  informa- 
tion and  reports  not  relating  to  interstate  commerce,  but  relating  chiefly 
or  wholly  to  production,  and  under  its  order  the  information  which  it 
has  the  power  to  demand  cannot  be  separated  from  that  over  which  it 
has  no  control. 

While  as  in  other  matters,  as  stated  in  In  re  Pacific  Railway  Com- 
mission, supra.  Congress  may  authorize  the  Commission  to  obtain  in- 
formation upon  any  subject  which,  in  its  judgment,  it  may  be  im- 
portant for  it  to  possess,  it  may  not  compel  the  production  of  such 
information  in  respect  to  matters  over  which  the  Federal  Government 
has  no  control. 

It  follows,  therefore,  that  the  Commission  cannot  compel  the  making 
of  the  reports  which  it  has  demanded  of  the  plaintiff. 

The  plaintiff  further  contends  that  this  power  of  the  Commission  has 
been  taken  away  by  Presidential  order.  Much  proof,  in  the  form  of 
affidavits,  has  been  introduced  by  the  defendant  to  show  contemporane- 
ous constructions  of  this  order,  and  that  the  power  claimed  by  the 
Commission  in  this  case  was  not  taken  from  it.  The  order  is  ambiguous, 
but,  in  view  of  my  opinion  as  to  the  power  of  the  Commission,  it  is  not 
necessary  to  decide  this  question  in  passing  upon  the  application  for  a 
preliminary  injunction. 

Section  10  of  the  Act  provides  that  "if  any  corporation  required  by 
this  Act  to  file  any  annual  or  special  report  shall  fail  to  do  so  within 
the  time  fixed  by  the  Commission  for  filing  the  same,  and  such  failure 
shall  continue  for  thirty  days  after  notice  of  such  default,  the  corpora- 
tion shall  forfeit  to  the  United  States  the  sum  of  $100  for  each  and 
every  day  of  the  continuance  of  such  failure,  which  forfeiture  shall  be 


UNIFORM  ACCOUNTING  17 

payable  into  the  Treasuiy  of  the  United  States,  and  shall  be  recoverable 
in  a  civil  suit  in  the  name  of  the  United  States  brought  in  the  district 
where  the  corporation  has  its  principal  office  or  in  any  district  in  which 
it  shall  do  business." 

The  plaintiff  has  failed  to  file  the  report  demanded  and  the  Com- 
mission has  notified  it  that  steps  will  be  taken  to  recover  the  penalty 
prescribed  above.  The  jurisdiction  of  a  court  of  equity  is  not  ques- 
tioned by  the  defendants,  and  as  I  am  of  the  opinion  that  the  Com- 
mission has  not  the  power  to  exact  the  reports  and  information  sought, 
the  injunction  prayed  for  will  issue  upon  plaintiff  executing  bond  with 
surety  to  be  approved  by  the  Court  in  the  penalty  of  $5,000. 

Following  this  injunction  -^tlie  Federal  Trade  Commis- 
sion continued  for  several  months  to  receive  data  with 
respect  to  coal  costs  from  those  who  sent  in  the  reports 
voluntarily.  The  volume  of  these  gradually  decreased  to 
a  point  where  the  tonnage  reported  was  no  longer  repre- 
sentative, and  about  the  middle  of  the  year  1920  the  Fed- 
eral Trade  Commission  discontinued  the  compilation  of 
coal  costs.  The  various  forms  prepared  by  the  Federal 
Trade  Commission  are  reproduced  as  a  matter  of  history. 

Form  Prepared  by  Federal  Trade  Commission  for  1919. 

— (Costs  were  never  collected  on  this  form  on  account  of 
lack  of  funds  to  carry  on  the  work.) 

The  1919  Cost  Sheet.— The  Federal  Trade  Commis- 
sion's cost  sheets  for  1919  which  was  sent  to  coal  opera- 
tors in  mimeographed  form  were  never  actually  put  into 
use.  The  cost  sheets  as  planned  provided  a  number  of 
schedules  in  which  labor  and  supplies  were  separated. 
The  balance  sheet  for  that  year  which  formed  a  portion 
of  the  report  was  practically  duplicated  in  the  forms  is- 
sued for  the  year  1920  and  for  that  reason  will  here  be 
passed  over. 

The  following  tabulation  shows  the  accounts  in  the 
sequence  in  which  they  appeared  in  the  profit  and  loss 
sheet,  this  sheet  being  supported  by  detailed  schedules : 


18 


BITUMINOUS  COAL  MINE  ACCOUNTING 


ACCOUNTS 

Sales  and  Transfer  of  Coal 

Commercial  Sales 

(Schedule  1     ) 

Departmental  Transfers 

(Schedule  1      ) 

Purchased  Coal  Sales — Commercial 

(Schedule  1      ) 

Purchased  Coal  to  Departments 

(Schedule  1     ) 

Total  Sales 

Allowances 

Freight  Prepaid  and  Charged,  if  any 

Total  Deductions 

Net  Sales 

Cost  of  Sales 

Mining 

(Schedule     2     ) 

Ventilation 

( Schedule     3      ) 

Drainage 

( Schedule     4     ) 

Yardage  and  Dead  Work 

( Schedule     5      ) 

Stripping 

( Schedule     6      ) 

Haulage 

( Schedule     7     ) 

Tipple  Operating 

(Schedule     8     ) 

Preparation — Commercial  Coal 

( Schedule     9     ) 

Power 

(Schedule  10     ) 

Mine  Overhead 

(Schedule  11      ) 

Fixed  Charges  to  Mining 

(Schedule  12     ) 

Other  Charges  to  Cost 

(Schedule  13     ) 

Total— Gross  Mine  Cost 

Deduct— Credits  to  Cost 

(Schedule  14     ) 

Net  Mine  Cost 

Tons 

Inventory  of  Coal  Beginning  of  Period   (Add) 

Tons 

Total 

Inventory  of  Coal  End  of  Period   (Deduct) 

Tons 

Total 

Selling  Expenses 

(Schedule  15     ) 

General  Expenses  and  Administration 

(Schedule  16     ) 

Cost  of  Production 

Purchased  Coal  Cost 

Total  Cost  of  Sales 

Profit  from  Coal  Sales 

Miscellaneous  Income   (Add) 

(Schedule  17     ) 

Total 

Deductions  from  Income  (Deduct) 

(Schedule  18     ) 

Net  Income 

Form  1. — Profit  and  Loss  Account 

The  profit  and  loss  sheet  was  followed  by  a  Coal  Sales 
Statement  which  called  for  information  as  to  production 
and  realization  of  and  for  the  various  sizes  and  the  dis- 
position of  the  production,  such  as  Local  Deliveries,  Sales 
to  Consumers,  Sales  to  Other  Coal  Operators,  Sales  to 
Eailroads  other  than  Those  Owned,  and  departmental 
transfers  specified  as  Coal  to  Own  Coke  Ovens,  Coal  used 
by  Own  Eailroads,  Steamboats,  etc.  Similar  accounts 
were  provided  for  Purchased  Coal  statistics. 


UNIFORM  ACCOUNTING  19 

The  following  tabulation  represents  the  Coal  Tonnage 
Statement,  designated  Schedule  la  and  shows  the  rather 
unusual  method  of  arriving  at  the  tonnage  produced,  and 
the  divisor  of  cost : 

DESCRIPTION 

Production  of  Coal   (Per  Tipple  Weights) 

Coal  to  Power-house   (Per  Tipple  Weights) 

Coal  sent  for  Preparation   (Per  Tipple  Weights) 

Coal  Realized  on  after  Preparation  (Per  Mine  Weights) 

Tonnage  of  Slate  and  Waste  Unrealized  on 
%  of  Preparation  Loss  as  to  Tonnage  Sent  for  Preparation         (     % ) 
%  of  Preparation  Loss  as  to  Production  (     %) 

Total  Coal  Not  Realized  on 

Net  Production  of  Coal    (Divisor). 
Coal  Stored  at  Mine  at  Beginning  of  Period 
Coal  Stored  at  Mine  at  End  of  Period 
Increase  or  Decrease 
Coal  to  be  Accounted  for 
Departmental  Transfers    (Per  Tipple  Weights) 
Sales:    (Per  Railroad  Weights) 

Prepared 

Run  of  Mine 

Slack 

Total  Sales 
Coal  in  Transit  not  Invoiced 

Total  Sales,  Transfers,  and  Coal  in  Transit 

Net  Production  Not  Accounted  for 
%  of  Shipping  Loss  as  to  Tonnage  to  be  Accounted  for  (     %) 

%  of  Shipping  Loss  as  to  Production  (      %) 

COAL  SHIPPED  FROM  MIXES 

By  Rail 
By  Water 

By  Wagon  or  Truck 
Total  Shipments 

Form  2. — Coal  Tonnage  Statement    (Schedule  la) 

The  voluminous  details  of  the  profit  and  loss  accounts 
required  to  be  kept  as  contained  in  Schedules  2  to  18  in- 
clusive follow: 


ACCOUNTS 

Mining 

(Schedule  2     ) 

Pick 

tons  @ 

Machine 

tons  @ 

Other  Mining 

tons  @ 

Company  Coal 

tons  @ 

Mining  Machine 

Repairs 

Total 

Timbering 

Total  Mining 

FOBM 

3. — Schedules  to 

Profit  and 

Loss 

Account 

20  BITUMINOUS  COAL  MINE  ACCOUNTINQ 

FoBM  3. — Schedules  to  Profit  and  Loss  Account — Continued 

Ventilation  (Schedule  3     ) 

Operation 

Equipment  Repairs 
Total  Ventilation 
Drainage  (Schedule  4     ) 

Operation 

Equipment  Repairs 
Total  Drainage 
Yardage  and  Dead  Work  (Schedule  5     ) 

Grading 

Removal  of  Slate  and  Waste 

Driving  Entries    (not  included  under  Development) 

Total  Yardage  and  Dead  Work 
Stripping  (Schedule  6     ) 

Stripping  Clay  and  Rock 

Removing  and  Loading  Coal  tons 

Contract  Stripping  and  Loading  tons  @ 

Equipment  Repairs 

Total  Stripping 
Haulage  (Schedule  7     ) 

Animal 
Mechanical 
Equipment  Repairs 
Stable  Expense 

Total  Haulage 
Tipple  Operating  (Schedule  8     ) 

Operation 

Equipment  Repairs 
Box  Car  Loading 
Switching  to  Main  Railroad  Tracks 

Total  Tipple  Operating 
Preparation — Commercial  Coal  (Schedule  9     ) 

Screening  (Tons  over  Screens)  tons 

Operation — Picking  Table 

Disposal  of  Waste 
Equipment  Repairs 

Total  Screening  tons 

Washery   (Tons  Washed)  tons 

Operation 
Disposal  of  Waste 
Equipment  Repairs 
Total  Washery 
Total  Preparation 
Power  (Schedule  10     ) 

Generating  Power   (Exclude  own  Fuel) 
Equipment  Repairs 
Purchased  Power 
Total  Power 
Mine  Overhead  (Schedule  11      ) 

Superintendence 
Engineering 
General  Inside  Labor 
General  Outside  Labor 


UNIFORM  ACCOUNTING  21 

Form  3. — Schedules  to  Profit  and  Loss  Account — Concluded 

Mine  Office   (Clerks  and  Supplies) 
Insurance — Liability  and  Compensation 
Welfare  Work  at  Mine 
Ordinary  Repairs  to  Buildings 
Total  Mine  Overhead 

Fixed  Charges  to  Mining  (Schedule  12     ) 

Royalty,  Current  tons  @ 

Depletion  tons  @ 

Depreciation 

1  Structures  % 

2  Equipment  % 

3  Development  tons  @ 
Rental  of  Equipment 

Total  Fixed  Charges  to  Mining 

Other  Charges  to  Cost-Specify  -  (Schedule  13     ) 

Extraordinary  Repairs  to  Buildings 
Extraordinary  Repairs  to  Equipment 
Total  Other  Charges  to  Cost 

Credits  to  Costs-Specify  (Schedule  14     ) 

Explosives  and  other  Miners'  Supplies 
Revenue  from  Smithing 
Revenue  from  Heat,  Light  and  Power 
Revenue  from  Houses    (Dwellings) 

Total  Credits  to  Costs 
Commissions 
Advertising 
Salesmen's  Salaries 
Traveling  Expenses 
Total  Selling  Expenses 

General  Expenses  and  Administration  (Schedule  16     ) 

Officers'  Salaries 
Officers'  Expenses 
Office  and  Clerical  Salaries 
General  Office  Expense 
Insurance,  General 

Taxes    (Except  Income  and  Excess  Profit) 
Total  General  Expenses  and  Administration 

Miscellaneous  Income  (Schedule  17     ) 

Stores 

Transportation  Facilities — Railroad 
Transportation  Facilities — Floating 
Coke  Sales  $  Less  Cost  $ 

Royalty  from  Owned  or  Leased  Lands 
Interest  on  Securities  Owned 
Dividends  on  Stocks  Owned 
Total  Miscellaneous  Income 

Deductions  from  Income  (Schedule  18     ) 

Taxes   (Income  and  Excess  Profits) 
Interest  on  Bonds 
Other  Interest 
Bonus  to  Officers 
Bonus  to  Employes 

Total  Deductions  from  Income 


22 


BITUMINOUS  COAL  MINE  ACCOUNTING 


FEDERAL  TRADE  COMMISSION  Pii.N.. 

SEMIBITUMINOUS,  BITUMINOUS  OR  SUBBITUMINOUS  COAL  OR  LIGNITE 
Report  on  Co»t,  Income  and  Tonnage  for  Month  of -1918 


(Full  DBHie  ot  reportinif  operntor)                                                                                                 (Address  of  principal  oIKce) 

No*      '**^°"°'                                                                         ACCOUNTS 

(cur4??rntM 

Per  ton* 

Amount  Jan.  1. 1 
and  including 
current  montb 

Perton^ 

1  61.    LABOR: 

2  a        Mining 

3  b       Yardage  and  dead  work 

4  c        Haulage 
6              d        Tipple 

6  e        Removing  stripped  coal 

7  t        Power 

8  g       Washery 

9  h        Other  operating  labor 

10  i        Maintenance  and  repairs: 

11  1.    Structures 

12  2.    Equipment 

13  j        Superintendence  and  engineering 

t    •♦••••» 

t  > 

•  c. 

1 

.    1  • 

•    0 

14                                Total  Labor 

15  .          62    SUPPLIES: 

16  a        Mine  timbers 

17  b        Feed  and  other  sUble  supplies 

18  c        Power  house  fuel, ..           tons,  @  f 

.  »  • 

19  d        Power  purchased 

20  e        Water  purchased 

21  f        Washery  supplies,  including  water 

22  g        Other  operating  supplies 

23  h        Maintenance  and  repairs: 

24  1.    Structures 

25  2.    Equipment 

26                                Total  Supplies 

27                                Total  Labor  and  Supplies  (add  lines  14  and  26) 

28  63.    DEBITS  AND  CREDITS  TO  COST:     (crediU  in  red) 

29  •       Profit  or  loss  on  explosives  and  miners'  fupplies 

30  b        Revenue  from  smithing 

81              c        Revenue  from  heat,  light  and  power 
32              d        Miscellaneous  debits  and  credits 

33                                Total  Debfts  and  Credits 

34                                Total  Operating  Cost  (take  line  27  and  add  or  dednrt  38) 

35             64.    FIXED  CHARGES  AND  GENERAL  EXPENSES: 

86             a        Royalty,  tons -. 

37              b        Depletion,  tons @  $ 

38  c       Depreciation: 

39  1.    Structures 

40  2.    Equipment 

41  8.    Development 

42  d        Deferred  charges:     (pro-rated) 

43  1.    Stripping 

44  2.    Royalty  (unrecoverable) 

46             •       Taxes  (except  income  and  excess  profits) 

46  f        Insurance— general 

47  g       Insurance— liability  or  workmen's  compensation 

48  b        Officers'  salaries  and  expenses % 

49  i        Clerical  salaries  and  office  expenses % 

60              j        Legal  expenses 

51                k         Miscellaneous 

63                                  Total  Mining  Cost  (add  lines  34  and  52) 

1 

*Line  130  (M)  is  the  divisor  to  be  used  to  determine  the  rate  per  ton  for  lines  2  to  63  inclusive. 
fLine  130  (N)  is  the  divisor  to  be  used  to  determine  the  rate  per  ton  for  lines  2  to  63  inclusive. 

FoBM  5. — Federal  Trade  Commission  coal  report  blank  for   1918. 


UNIFORM  ACCOUNTING 


23 


The  informftlion  required  bj  this  report  U  ordered  to  be  fumiahed  pursuant  to  the  power  of  the  CommiBsion  under  ■ubdiv{«ion  b  of  uction  6  of  "An  Act  to*  create 
Federal  Trade  Commission,  to  deflne  its  powers  and  duties,  and  for  other  purposes,"  and  under  paragraph  12,  section  26,  of  "An  Act  to  provide  further  for  the 
atiooal  McurHr  and  defense  by  encouraging  the  productron,   conserving  the  supply  and  controlUng  the  distribution  of  food  and  fuel."  which  is  as  follows: 

.  "The  books,  correspondenece,   records,   and  papers  in   any  way   referring  to  transactions  of  any  kind   relating  to  the   mining,   production,   sale,   or  distribution  of  all 
mine  operators  or  other  persons  whose  coal  and  coke  have  or  may  become  subject  to  this  section,  and  the  books,  correspondence,  records,  and  papers  of  any  penoQ  •{»• 


plrinff  for  < 


purchase  of  coal  and  coke  from  the  United  3Utes  Aball  at  all  times  be  subject  to  inspection  by  the  said  agency" 


Palhir*  to  1 
failure     Section  10,  Federal  Trade  Commission  . 

Any  person  who  shall  wilfully  make  « 
than  $6,000.  or  imprisonment  for  a  term  ol 


for  each  and  every  day  of  Um  contlnuaac*  of  ttieli 


Une      Account                                                                   ACCOUNTS 

(cu^.'Srrn-^nth)     h"'""' 

Amount  Jhd.  1  to 
C-u-'^.'S^'i^. 

|p«too.| 

56             65.     SELLING  COST: 

66  a        Commissions 

67  b        Advertising 

68  c        Salesmen's  salaries  and  expenses 

59  d        Offlcers'salaries  and  expenses ...% 

60  e        Clerical  salaries  and  office  expenses <r, 

61  f        Uncollectible  accounts 

62  g        Miscellaneous 

•  ••••••• 

c.„. 

•c. 

!••  •  *  •  •  •, 

«^ 

•c. 

63                                Total  Selling  Cost 

64                                Total  Mining  and  Selling  Cost  (add  lines  53  and  63) 

66                                               INCOME.  STATEMENT. 
66             56.    COAL  SALES  (line  121,  columns  F  and  G) 

•  o. 

•«• 

67  67.    COST  OF  COAL  SOLD: 

68  •        Purchased  coal  cost 

69  b        Coal  inventory,  deduct  increase,  add  decrease  (line  124  or  125,  col.  K) 

70  c        Minincr  and  selling  cost  (line  64) 

, 

•    ••••••* 

71                               Total  Cost  op  (3oal  Sold 

' 

72                                  Profit  fkom  Coal  (subtract  line  71  from  66) 

73  68.    MISCELLANEOUS  INCOME:     (Net) 

74  a        Dwellings 

75  b        Commissaries  or  stores 

76  c        Transportation  facilities 

77  d        Coke 

78  e        other  non-mining  physical  properties 

79  f        Royalty,  tons 

• 

80  g        Miscellaneous:  (itemize) 

81  1. 

82  2. 

83  H. 

86  59.    DEDUCTIONS  FROM  INCOME: 

87  a        Taxes  (income  and  excess  profits) 

88  b        Interest 
89 

*  *   *  * 

■ 

91                                 Net  Income  (subtract  line  90  from  86) 

92  CHARGES  TO  FIXED  ASSETS 

93  Surface  lands 

94  Coal 

95  Structures 

96  Equipment 

97  Development 

98                                Total 

Approved  and  Certified  Correct: 
To  be  signed  by  reporting  operator. 

(Name  asd  title  o(  officer.) 

*Line  110  (F)  is  the  divisor  to  be  used  to  determine  the  rate  per  ton  for  lines  66  to  63  inclusive. 
fLine  110  (G)  is  the  divisor  to  be  used  to  determine  the  rate  per  ton  for  lines  66  to  63  inclusive. 


Form  5. — Federal  Trade  Commission  coal  report  blank  for  1018   (contimied] 


24 


BITUMINOUS  COAL  MINE  ACCOUNTING 


COAL 


SIZES 

Power  House 

Coal  To  Coke 

"" 

^*'n.T???d"a*ni';t'r4d^cSSr-- 

1 

Name 
(A) 

Description  oj  Screen 

(B) 

(C) 

Local 

(D) 

Other  than  local 
(E) 

irina 

^-^.-o'cSe^r' 

Orer 

Thru. 

Tons                            Cwt. 

Tons                          Cwt. 

Tons                            Cwt. 

Tons                             Cwi. 

100 
101 
102 
lOS 
104 
106 
106 
107 

108  Slack 

109  Run  of  Mine 

IM        TOTAL 

COAL 

1 

I                              e. 

1                                                0. 

c.   i 

111 
112 

lis 

114 
116 
116 
117 
118 

119  Slack 

120  Run  of  Mine 

121        TOTAL 









GENERAL  INFORMATION 

Number  or 
name  of  Mine 

s 

Cause 
•gaVr 

Average  No.  of  men 
employed  per  day  wk'd 

Location  of  Mines 

•gsif 

«"■ 

(iocheal 

State 

County 

field 

Miner* 

Day  Men 

131 
132 
133 
134 

iS 

189 
140 
141 

REMARKS 

142 
14S 
144 

145 
146 
147 
14S 
149 
160 
151 
162 

Shipped  Irom  Collieries: 

By  water 

By  rail 
Sold  to  Railroads 
Used  on  Railroads  owned 

by  reporting  operator 

Ton. 

^      1 

Tor 

s  ol  coal  yield  one  ton  of  coke. 

X  Seml-bituminou», 

cannel, 

splint,  bit 

uminous,  s 

ub-bitumln 

BUS  or  lij; 

oite. 

Form  5. — Federal  Trade  Commission  coal  report  blank  for  1918  (continued). 


UNIFORM  ACCOUNTING 
TONNAGE  (2.000  POUNDS) 


25 


Toul  Jor  current 

(Add  B.  C.  D  and  £) 
(F) 

Accumulated  total 
Columo  F.  Jan.  1.  to  and  in- 
cluding current  montb 

(G) 

Purcbased  Coal 
(current  monib) 

(H) 

Washed  Coal 
(current  montb) 

(I) 

Stripped  Coal 
(current  month} 

(J) 

Tons                                     Cwt. 

Tons                                      C-t. 

Ton,                                   Cwt. 

Tons                                 Cwt. 

Tons                                     Cwt. 

• 

SALES 


COAL  INVENTORIES 


PRODUCTION  TONNAGE 


ITEM 

(K) 

(L) 

ITEM 

Current  Mo. 
(M) 

Accumulated 
(N) 

»                       c. 

Tons            Cwt. 

Tons               Cwt 

Tons                     Cwt. 

122  Inventory  1st  of  Month 

123  Inventory  end  of  Month 

124  Increase 

125  Decrease 

126  Totar  sales  (col.  K,  line  110) 

.   • 

127  Purchased  (col.  H,  line  110) 

•   ♦ 

128  Net  (deduct  line  127  fr.  126) 

129  Inv'y  iMHa^MtHm^UH  llHrlZS) 

•   * 

130  Production 

_ 

_ 

MEMORANDA 

For  use  of  the  Federal  Trade  Commission  only.) 

EXAMINED 

CORRESPONDENCE  FORWARDED                                                                            | 

IniUals 

Memo,  of  Error* 

Date 

An».  Req. 

Subject 





CORRESPONDENCE  RECEIVED                                                                             | 



Sender 

Date 

Anad 

By 



" 

•• 





"1 

FoBM  5. — Federal  Trade  Commission  coal  report  blank  for  1918  (concluded). 


26 


BITUMINOUS  COAL  MINE  ACCOUNTING 


FEDERAL  TRADE  COMMISSION  FikN..- 

SEMIBITUMINOUS,  BITUMINOUS  OR  SUBBITUMINOUS  COAL  OR  UGNITE 
Report  oh  Cost,  Income  and  Tonnago  for  Month  of 1918 


(FuUr 


i  of  reporting  operator) 


(Addresser  principal  office) 


The  information  required  by  thta  report  ii  ordered  to  be  f 
Federal  Trade  Commistion.  to  define  iti  powers  and  duties.  : 
rity  and  defense  by  encouraging  the  production,  c( 
>ooks,  correspondenece.  records,  and  papers  in  any 
ra  or  other  persons  whose 
a  purcbaa*     '        •        ■       ' 


the  supply  and  eontrollinff  the  distribution  of  food  and  fuel,"  which  is  as  follows: 
referring  to  transactions  of  any  kind  relating  to  the  mining,  production,  sale,  or  distribution  of  ali 

„     _  _  come  subject  to  this  section,  and  the  books,  correepondence,  records,  and  papers  of  any  person  ap- 

coal  and  coke  from  the  United  States  shall  at  aU  t^mea  be^subject  to  f 


r«llur«  to  m«ll  thli  report  within  the  time  required  wiU  lubject  the  corporation  to  ■  forfeiture  of  the  lani  of  1100  for  each  and  every  day  of  the  eentinuance  of  lucli 

'^""xnt'pireon'whoVhril  li'/uUy^r.ke"'?" au."  to  be  mad.  any  falae  entry  or  .tatement  of  faet  1.  thta  report  .haU  be  .ubtet  to  a  line  of  not  leM  than  tlOOO  u,  ..re 
than  tl.OOO.  or  impriaonment  for  a  term  of  not  more  than  three  yeara  or  to  both  aueh  fine  and  imprtaonment     Section  10.  FedoraJ  Trade  CommiMlon  Act 

no"        ^-iJS""                                                                      ACCOUNTS 

(current  month) 

per  ton* 

Amount  Jan.  1  to  and 
moludtng  current  mo. 

per  tont 

1  161.    LABOR: 

2  a        Labor,  mining  $ washery  % 

8              b        Superintendence  and  engineering 

... 

4                                Total  Labor 

5  162.    SUPPLIES: 

6  a        Operating  and  repair  supplies,  mining  $ ,  washery  $ 

7  b        Power  purchased 

8  c        Power  house  fuel, .^  tons  @  $ 

9                               Total  Supplies 

10                                Total  Labor  and  Supplies  (add  lines  4  and  9) 

U          163.    DEBITS  AND  CREDITS  TO  COST:     (crediU  in  red) 

12  a        Profit  or  loss  on  miner's  supplies 

13  b        Revenue  from  smithing 

1«               c        Miscellaneous  debits  and  crediU 

IB                                 Total  Debits  and  Credits                                                             j 

16                                  Total  Operating  Cost  (take  line  10  and  add  or  deduct  15)         l! 

17  164.    FIXED  CHARGES  AND  GENERAL  EXPENSES: 

18  a        Royalty,  tons 

19  b        Depletion,  tons @  $ 

.....»• 

20  c        Depreciation  (exclude  depreciation  on  delivery  equipment) 

21  d       Taxes  (except  income  and  excess  profits) 

22  c        Insurance— general 

28              f        Insurance — liability  or  workmen's  compensation 

24               g        Officers'  salaries  and  expenses 

26              h        Clerical  salaries  and  office  expenMs 

26               i        Miscellaneous 

f 

f 

ft 

t 

28                                  Total  Mining  Cost  (add  lines  16  and  27> 

29  166.    SELLING  AND  DELIVERY  EXPENSES: 

30  a        Commissions 

SI               b        Uncollectible  accounU 

32              c        Delivery  expenses 

38                           1.    Labor 

34                           2.    Supplies 

as                           3.    Depreciation 

36              d        Other  selling  or  delivery  expenses 

•• 

per  lent 



.. 

pertoDi 

I 

87.                                Total  Selling  and  Delivery  Expenses 

1 

38                                Total  Mining  and  Selling  Cost  (add  lines  28  and  87) 

1 

S»                                                INCOME  STATEMENT 

1 

, 

41  157.    COST  OF  COAL  SOLD: 

42  a       Purchased  coal  cost 

43  b        Coal  inventory,  add  decrease,  deduct  increase  (Unes  81  or  82,  col.I) 

44  Mining  and  selling  cost  (line  38) 

!•!! 

46                                Total  Cost  op  Coal  Sold  (add  lines  42.  43  and  44) 

46                                Profit  from  Coal  (deduct  line  45  from  40) 

47  158    MISCELLANEOUS  INCOME:  (Net) 

48  a        Dwelling. 

49  b        Commissaries  or  stores 

60  c       Coke 

61  A        Miscellaneous 

*  *  • 

62                                Total  Miscellaneous  Income 

.63                                Total  Income  (add  lines  46  and  62)  carried  forward 

!H"'  fZ  {??  .'"  *?"  divisor  to  be  used  to  determine  the  rate  per  ton  for 
tLine  87  (L)  is  the  divisor  to  be  used  to  determine  the  rate  per  ton  for 


Form   6.— Federal   Trade   Commission    coal    report   blank   for   small    companies 

in  1918. 


UNIFORM  ACCOUNTING 


27 


1                                        0- 

t                                    e. 

64                               Total  Income  (Brooght  forward) 

66  169.    DEDUCTIONS  FROM  INCOME: 
69              a        Taxes  (income  and  excess  profiu) 

67  b        Interest 

68  c        Miscellaneous 

69                               Total  Deductions 

60                               Net  Income  (deduct  line  69  from  64) 

61  CHARGES  TO  FIXED  ASSETS 

62  Surface  Lands 

63  Coal 

64  Structures 

65  Equipment 

66  Development 

COAL  TONNAGE  (2.000  POUNDS)                                                                     | 

N.meorSlie 
(A) 

De»crlptloo  of  Scweo 

Power  House 
Fuel 

fB) 

Co.1  wubed 
(black)  aod 
Coal  to  coke 
OTeD.(re<l)V 

(C) 

SaleiTonnase 
(Include  purchased  coal) 

Total  for 

moMh°of 

leia 

^=ot^o"f'ro^'• 

u»o,r»an.. 

oSjl-nl'SS,. 
(G) 

Purehssed 

Coal 

(current  mo  ) 

(H) 

Perfor- 
ated or 
Bar 

SUeofOpealoc 
(loctaet) 

Local 
(D) 

Oth«Thaa 
(K) 

(add  B  C.D.*E.) 
(F) 

Over 

Thru. 

Tons        Cwt. 

Too.          Owt. 

Too»            Cwt. 

Tons           Cwi. 

Tons           Cwt. 

Tons           Cwt 

TOSS           Owt 

66 

69 

1  70    Slack 

1  71    BUn  of  Mine 

72        TOTAL       1 

COAL  SALES 

t                   o. 

1                  el 

$                         0. 

1                  o. 

♦                           O. 

$                         0. 

78 

76 

76  SUck 

77  RitnofMine 

78        TOTAL 

COAL  INVENTORIES 

PRODUCTION  TONNAGE 

ITEM 


Inventory   1st  of   Month 
Invetitory  end  of  Month 
I|tcr«ase 
Decrease 


ITEM 


83  Total  Sales  (col.  F  line  72) 

84  Purchased  Coal  (col.  H  line  72) 

85  Net  (deduct  line  84  from  83) 

86  Inv'jr  (add  inc.  deduct  dec. ), 

87  Production 


Current  Mo. 
(K) 


Tons  Owt. 


**!**!* 

»••«'* 


GENERAL 

INFORMATION 

Niinib«ror»aBeotMine 

& 

Cause  of 

At(  No.  men  employed 
per  day  worked 

Location  of  Mine 

Kind  of 
Coalt 

Number  or 
"ISSn"' 

Arersse 

?eS;"iSJb°i, 

Miners- 

Dav  Men 

State                  CouniT 

Dist.  or  PleM 

MEMORANDA  (For  use  of  the  Federal  Trade  Commission  only). 

REMARKS 

nined 

correspondence  Forwarded 

initial 

Memo  of  Errors 

Date 

Ans.Req. 

Subleot 

::::::::: 



Correspondence  ReceiTed 

Approved  and  Certified  Correct: 

Sender 

Date       Ans'd 

By 



(Name  ani  titU  of  officer) 

I 

tor 

s  of  coa 

vielH 

one  ton 

.frok 

S. 

t  Semibiturainous,  cannel,  splint,  bituminous,  subbituminous  or  lignite. 


Form  6. — Federal  Trade  Commission  coal  report  blank  for  small  companies  in  1918 

( reverse ) . 


28  BITUMINOUS  COAL  MINE  ACCOUNTING 

Form  of  Report  Required  by  the  Federal  Trade  Com- 
mission in  1920. — This  is  the  form  the  requiring  of 
which  was  enjoined  by  the  Supreme  Court  of  the  District 
of  Columbia. 

Form  C-51  F.  T.  C. 


State Field File  No. 


(DO  NOT  USE.     For  F.  T.  C.  only.) 


FEDERAL  TRADE  COMMISSION 

REPORT  ON 

COST,  INCOME,  AND  TONNAGE 

OF 

SEMIBITUMINOUS,  BITUMINOUS,  OR 

SUBBITUMINOUS  COAL  OR  LIGNITE 


(Full  name  of  reporting  operator] 


(Address  of  principal  office) 


(Month) 


19— 


Form  7. — Form  of  Report  required  by  the  Federal  Trade  Commission 

in  1920 


UNIFORM  ACCOUNT  IN  a  29 


NOTICE 


Attention  is  directed  to  the  following  extract  from  "An  Act  to  Create 
a  Federal  Trade  Commission,  to  deline  its  powers  and  duties,  and  for  other 
purposes,"  approved  Septemlber  26,   1914: 

"That  the  Commission  shall  also  have  power   ..." 

"Section  6  (b),  To  require,  by  general  or  special  orders,  corporations 
engaged  in  commerce,  excepting  banks,  and  common  carriers  subject  to 
the  act  to  regulate  commerce,  or  any  class  of  them,  or  any  of  them, 
respectively,  to  file  with  the  Commission  in  such  form  as  the  Commission 
may  prescribe  annual  or  special,  or  both  annual  and  special,  reports  or 
answers  in  writing  to  specific  questions,  furnishing  to  the  Commission 
such  information  as  it  may  require  as  to  the  organization,  business,  con- 
duct, practices,  management  and  relation  to  other  corporations,  partner- 
ships, and  individuals  of  the  respective  corporations  filing  such  reports  or 
answers  in  writing.  .  .  ." 

"Section  10.  .  ,  .  Any  person  wljo  shall  wilfully  make,  or  cause  to  be 
made,  any  false  entry  or  statement  of  fact  in  any  report  required  to  be 
made  under  this  Act,  or  who  shall  wilfully  make,  or  cause  to  be  made, 
any  false  entry  in  any  account,  record,  or  memorandum  kept  by  any  cor- 
poration subject  to  this  act,  or  who  shall  wilfully  neglect  or  fail  to  make, 
or  to  cause  to  be  made,  full  true,  and  correct  entries  in  such  accounts, 
records,  or  memoranda  of  all  facts  and  transactions  appertaining  to  the 
business  of  such  corporations,  or  who  shall  wilfully  remove  out  of  the 
jurisdiction  of  the  United  States,  or  wilfully  mutilate,  alter,  or  by  any 
other  means  falsify  any  documentary  evidence  of  such  corporation,  or  who 
shall  wilfully  refuse  to  submit  to  the  Commission  or  to  any  of  its  au- 
thorized agents,  for  the  purpose  of  inspection  and  taking  copies,  any  docu- 
mentary evidence  of  such  corporation  in  his  possession  or  within  his  con- 
trol, shall  be  deemed  guilty  of  an  offense  against  the  United  States  and 
shall  be  subject,  upon  conviction  in  any  court  of  the  United  States  of 
competent  jurisdiction,  to  a  fine  of  not  less  than  $1,000  nor  more  than 
$5,000,  or  to  imprisonment  for  a  term  of  not  more  than  3  years,  or  to 
both  such  fine  and  imprisonment. 

"If  any  corporation  required  by  this  act  to  file  any  annual  or  special 
report  shall  fail  so  to  do  within  the  time  fixed  by  the  Commission  for 
filing  the  same,  and  such  failure  shall  continue  for  30  days  after  notice 
of  such  default,  the  corporation  shall  forfeit  to  the  United  States  the  sum 
of  $100  for  each  and  every  day  of  the  continuance  of  such  failure.  .  .  ." 


CERTIFICATION 

Cost,  income,  and  tonnage  report  of 


(Name  of  operator) 

for  the  month  of  ,  19 — . 

Approved  and  certified  correct: 


To  be  signed  by  reporting  operator. 


(Name  and  title  of  oflflcer) 
Date  ,   19—. 


Form  7. — Form  of  Report  required  by  the  Federal  Trade  Commission 
in  1920 — Continued 


30 


BITUMINOUS  COAL  MINE  ACCOUNTING 
File  No.- 


Full  name  of  reporting  operator) 


(Address  of  principal  office) 


Month  of- 


19- 


Line 

No.                 ACCOUNTS 

AMOUNT 

DO  NOT  USE 
(For  F.  T.  C.  Only) 

1  LABOR: 

2  Pick   Mining    tons 

3  Machine  Mining    tons 

4  Other   Operating  Labor 

5  Maintenance  and   Repairs 

fi  Mine    Oflfice     /Clerks^ 

$ 
*  »  * 

*  *  * 

t,. 

*  *  * 

*  *  * 

*  *  * 

1 

7    Superintendence,    $ . .    Engineer- 
ing, $ 

1 

8     

9       TOTAL  LABOR  

10  SUPPLIES       (Exclude      power- 
house fuel)  :    

*  *  # 

*  *  * 

*  *  * 

«  »  # 

«  *  * 

*  *  * 

11  Operating  Supplies    

12  Power  Purchased   

13  Maintenance  and  Repairs 

14 

15       TOTAL  SUPPLIES  

16      Total    Operating    Cost     (Add 
Lines  9  &  15)    

17  NET    DEBITS     (in    Black)     & 

CREDITS    (in  Red)  : 

18  Supplies  sold  and  Miscellaneous 

*  *  * 

**  * 

...! 

*  *  * 

*  *  * 

»  »  « 

19       NET  OPERATING  COST 

(Take  line  16  and  add  or  de- 

duct line  18)    

*  *  * 

20  FIXED  CHARGES  AND  GEN- 
ERAL EXPENSES: 

*  *  * 

»  *  « 

*  #  * 

»  »  * 

*** 

21  Royalty ....  tons  @  $..   per  ton 

22  Depletion. .  .tons  @  $..  per  ton 

23  Amortization 

(a)   Development 

@  $..    per  ton 

(b)    Stripping  @  $. .  per  ton. 

24  Depreciation    

1 

II 

Form  7. — ^Form  of  Report  required  by  the  Federal  Trade  Commission 
in  1920 — Continued 


UNIFORM  ACCOUNTING 


31 


(Full  name  of  reporting  operator) 


(Address  of  principal  office) 


File  No.- 


Mohth  of- 


19— 


Line 

No.                  ACCOUNTS 

AMOUNT 

DO  NOT  USE 
(For  F.  T.  C.  Only) 

25  FIXED   CHARGES   AND   GEN 
ERAL  EXPENSES    (Cont'd) 

$ 
*** 

*** 

*** 

»  »  * 

*  *  » 

»  *  * 

26  Officers'    Salaries        

1 

27  Officers'   Expense    

28  Office   and  Clerical   Salaries    .  .  . 

29  General  Office  Expenses    

30  Taxes    (Except    income   and    gx- 

cess  nrofits)                     -.  • 

31  Insurance — General    

32  Insurance — Liability  or  Compen- 

sation             

33                         

1 

34       TOTAL     FIXED     CHARGES 
&  GENERAL  EXPENSES. 

! 

*** 

*** 

35       TOTAL   MINING   COST 

(Add  lines   19  and  34) 

36  SELLING  COST: 

37  Officers'     Salaries,     $..      Ex- 

* *  » 

*  *  * 

*  *  * 

penses,  $ 

38  Salesmen's  Salaries  and  Expenses 

39  Commissions    

40  General   Sales   Office   Expenses .  . 

1              1 

41       TOTAL  SELLING  COST  .... 

$ 
*** 

*** 

*** 

i 

42       TOTAL  MINING  &  SELLING 
COST  (Add  lines  35  and  41) 

43         INCOME  STATEMENT 

44  COAL     SALES     AND    TRANS- 

FERS: 

45  Commercial   Sales    (line  75,  col- 

umn D )    

*  *  * 

*  *  * 

w  «  « 

46  Departmental  Transfers  (line  75, 
column  E )    

47  Purchased   Coal   Sales    (line  75, 
columns  F  and  G )        

48       TOTAL  SALES  AND  TRANS- 
FERS     

Form  7. — Form  of  Report  required  by  the  Federal  Trade  Commission 
in  1920 — Continued 


32 


BITUMINOUS  COAL  MINE  ACCOUNTING 
—  File  No.- 


(FuU  name  of  reporting  operator) 


(Address  of  principal  office) 


Month  of- 


-,  19- 


Line 

No.                 ACCOUNTS 

AMOUNT 

DO  NOT  USE 
(For  F.  T.  C.  Only) 

49  COST  OF  COAL  SOLD: 

50  Mining   and    Selling    Cost    (line 

42)     

$ 
*  *  * 

i,. 

*  *  * 

*  *  * 

*  *  * 

51  Coal  Inventory,  deduct  increase, 
add  decrease   (value  shown  on 

line  89 )    

52  Purchased  Coal  Cost   

53       TOTAL    COST     OF     COAL 
SOLD    

• 

54       PROFIT  FROM  COAL    (Sub- 
tract line  53  from  line  48) 

55  MISCELI-ANEOUS  INCOME: 

56  Net  Receipts  from  Coke  Sales . . 

57  Royalty  from   Owned  or  Leased 

*  *  ♦ 

*  «  * 

»  *  » 

*  *  * 

*  *  * 

fiS    Tirfprpaf.  smH    l~iiviflpTiflH 

59 

60      TOTAL  MISCELLANEOUS 
INCOME    

61       TOTAL   INCOME    (Add  lines 

54  and  60)    

62  DEDUCTIONS  FROM  INCOME : 

*  *  * 

*  ♦  * 

*  *  * 

"  *  * 

**  * 

63  Taxes,   Income  and  Excess 

Profits     

64  Interest 

65 

66  TOTAL    DEDUCTIONS    FROM 
INCOME    

67  NET  INCOME  (Subtract  line  66 
from  line  61 )    

REMARKS 
(For  use  of  reporting  operator) 

MEMORANDUM 
(For  use  of  F.  T.  C.  only) 

Form  7. — Form  of  Report  required  by  the  Federal  Trade  Commission 
iq  1920 — Continued 


UNIFORM  ACCOUNTING 


33 


g     I 


B       - 


CO 

! 

2 

-(J 

a 

0) 
(h 

s 

a 

00 

1 

o 

o 

oQ 

a 

s 
5^ 

1 

o 

i 

(G) 

Sales  to 

other 

Consumers 

(Tons) 

COAL  SALES 

-^ 

■^ 

(F) 

Sales  to 

railroads 

(Tons) 

■^ 

-   1 

DEPART- 
MENTAL 
Transfers 

(E) 

Coal  to  coke 

ovens,  own 

railroads, 

etc. 
(Tons)  * 

-  1 

-ee 

Q  S 

Bi 
11 

(D) 
Total  Com- 
mercial sales 
(Add  A,   B, 
&  C) 
(Tons) 

^ 

1 

5©- 

(C) 

Sales  to 

other 

Consumers 

(Tons) 

-td 

S©- 

_ 

(B) 

Sales  to 

railroads 

(Tons) 

td 

^ 

1 

(A) 

Local   sales 

and  coal  to 

miners 

(Tons) 

-Ml 

-      1 

GRADE  OF  COAL 

Line 
No. 

1 
2 

00 

o 

1 

1^ 

0) 

a 

s 

^§; 

PhC 

CO 

is 

B 
B 

,-i       o 


o 


73 


>» 
^ 


!3 

cr 

t 


34 


BITUMINOUS  COAL  MINE  ACCOUNTING 


Average 

thickness 

of  seam 

( inches ) 

Number 
or  name 
of  seam 

a 

*a 

a 
.2 

2 

3 

1 

i 

i 

1          j 
i 

Total  Number  of 

men  on  pay  roll 

during  month 

CD 

Average  Number 
of   men   employed 
per   day   worked 

fl 
m 

^ 

^ 

a 

I 

s 

Number 

days 
Worked 

b- 

t^ 

: 

ao 

: 

; 
o 

o 

QO 

00 

^ 

I 


u 
o 


UNIFORM  ACCOUNTING 


35 


X 

X 

X 

X 

X 

X 

X  1  X 

X 

X 

« 

X 

H 

X 

X 

o 

p^ 

o 
o 
o 


X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 
X 

X 

X         X  I 
X  X 

X  X 


H 


8  el 


§1 


c3   .S 


<4-i      to 


3^ 


Ph    Sh 

O   "73 

c    o 


m 


O     »     O 

H  Q  O 


oT  'd  "tS  * 

O)  Oi  0)  ^-^ 

I— 1  Jh  ^^ 

ee  o  o  o 


-t->    e^    cS    o 
O     O     O     c 

H  O  O  5 


36 


BITUMINOUS  COAL  MINE  ACCOUNTING 


I 


CO 

<5 


«5 

(J 

-:: 

'i 

X 

X 

X 
X 

X 
X 

X 

X 

X 
X 

X 
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X 

X 
X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 
X 

X 
X 

X 
X 

X 
X 

X 
X 

X 

X 

«t: 

X 

X 
X 

X 
X 

X 

X 

X 
X 

X 
X 

X 
X 

X 
X 

X 
X 

X 
X 

X 
X 

0 

-^ 

n 

X 

X 
X 
X 

X 
X 

X 

«5«- 

X 

X 

X 
X 

1 

1 

1 

0 

i 

IE 

OS 

i 

0 

i 

i 

S 

'5 

J 

0 

1 

2 

i 

0 

3 
i 

2 

1 

-d 

> 

0 

P5 
0 

g 

H 

GO 

0 

t 

(S 

> 

.£ 

1 
g 

QQ 

c 

1— 1 
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0 

1 

> 
a 

1 

1 

0 

t 

c 
> 

or 

■•  .2; 

1 

p-i 

a 

e 
c 

P-H 

1— 1 

< 

p 

g 

UNIFORM  ACCOUNTING 


37 


« 
« 

X 

X 

X 

X 

X 
X 

X 

X 

X 
X 

X 

X 

X 

X 

X 

X 

X 
X 

X 

X 

X 

X 

X 
X 

X 

X 

X 
X 

X 

X 

X 

X 

X 

X 

X 
X 

X 
X 

X 

X 

X 

X 

X 

X 

X 

X 

X 
X 

X 

X 
X 

X 

X 

X 
X 

X 
X 

X 

X 

X 

X 

X 
X 

X 

X 

X 

X 

X 

X 

X 

X 

X 
X 

X 

X 

X 

H 

X 

X 

X      X 

X 
X 
X 

X 
X 
X 

X 
X 
X 

X 
X 
X 

X     X 

X      X 
X      X 

X 

X 

X 
X 

X 

X 

X 

X 

X      X 

X      X 

> 

II 

li 

G 

00 

.2 

*s 

u 

Ci 

o 
o 

1 

I-H 

1 

i 

o 
o 

CO 

G 
O 

m 

OQ 

1 

1 

.2  • 

i; 

1— 1 

< 

6 

I-H 

1 

00 

G 

pq 

I-H 

g 
1, 

1 

00 

1 

0) 

a 

1 

CO 

00 

1 

'c 

1 

I-H 

1 

00 

a 

3 

OQ 

QO 
CO 

0    . 

'■§  : 

OS 

OQ 

< 

Q 

< 

i 

1 

0 

CO 

00 

'0 

1 

CO 

CO 

-4- 

> 

t 

1 

1 

H      C 

I 


^ 


38 


BITUMINOUS  COAL  MINE  ACCOUNTING 


a 


X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

^x 

X 

X 

X 

X 

X 

X 

X 

X 

X 

^ 

X 

« 

X 

X  |X 

X 

X 

X 

X 

X              II 

>< 

X 

X 

X 

X 

X 

X 

X 

X 

X 

Q 

5h 

1 

1 

.^  >< 

X 

X 

X 

X 

X 

X 

X 

X 

X 

^x 

X 

X 

X 

X 

X 

X 

X 

X 

X 

o  a* 


H  H 


in  «o  t^  CO  05  o 

CC  CO  CO  5*5  CO  tM 


-t^  a 


a*  r,  T! 


H  HH  P 
CO  CO  Tt*  if3 

^^   TP   ^^   Tt^ 


UNIFORM  ACCOUNTING 


39 


( 

1 

- 

1 

i 
1 

« 

X 

« 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

1 

X 

~ 

>< 
« 

X 

:3 

X 
X 
X 

X 
X 
X 

X 

X 

X 

X 
X 
X 

X 
X 

X 

X 
X 

X 

X 
X 
X 

X 
X 
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X 

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X    X 
X    X 

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>< 

X 
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X 
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X  !x 

X      X 
X      X 

^1 

ii 

03 

S  o 
h- 1 

1 

o 
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CO 

a» 
§ 

a 

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1 

00 

3 

o 

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1 

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S   : 
^   • 

^  ; 

<^  : 

>*  . 

CO 

CO 

g 

1 
1 

2 

'T3 

"i 

o 

1 

1 

OS 

1 

> 

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lO 

03 

'E. 

lO 

00 

o 

lO 

o 

CD 

?o 

2 

s 

13 

h-t 

i 

P3 


40 


BITUMINOUS  COAL  MINE  ACCOUNTING 


REPORT  ON 

BITUMINOUS  COAL  PRODUCTION,  COST  AND  INCOME 

OF 


FOR. 


Account                                                                                         COST 
No. 

1 
2 
3 
4 
5 
6 
7 
8 

MINING  COST 

LABOR 

Amount 

Per  Ton 

Miae  Office  and  Superintendence 

9 

Total  Labor 

10 
11 
12 
13 
14 
15 
10 

OTHER  CHARGES  AT  MINE 

Power  Plant  Fuel-^Ton^ ' .' .' .'       :::: ;.::  .Price's  l!  i!  i!  l,'  ^  l!!  l!  ] 

Electric  Current  Purchased 

Loss  or  Gain  on  Explosives  and  Smithing  (Gain  in  Red) 

17 

Total  Other  Charges  at  Mine 

18 

COST  AT  MINE 

19 
20 
21 
22 
23 
24 
26 
•     26 
27 
28 
29 
30 

OVERHEAD 
Royalty 

Depletion  .                                            

Depreciation 

Taxes  (Other  than  Income  and  Excess  Profit) 

Insurance  (General) 

Insurance  (Liability  or  Workmen's  Compensation) 

i  )fficer8'  Salaries  and  Expenses  .' '..._(  %) 

Other  Genersl  Office  Salaries  and  Expenses ( %) 

31 

Total  Overhead 

32 

ToUl  Mining  Cost  (Divisor— Tons  of  Production— Account  No.  107) 

33 

u 

36 
37 
38 
39 
40 
41 
42 

SELLING  COST 

Bad  AccounU 

Salaries  and  Expenses  of  Salesmen  and  Sales  Agencies  . 

8fhrGe^nS^°c^  Errand  Expen.e.::::::::::l.;:::::.l^ 

43 

Leas  Selling  Cost  applicable  to  Items  charged  against  Miscellaneous 

44 

Total  Selling  Cost  (Divisor-Total  Production  Salcs-Acct.  No.  67) 

45 

Total  Cost  per  Ton 

* 

♦  ♦ 

•  ♦ 

• 

J? 
48 
49 

DEDUCTIONS  FROM  INCOME 

Taxes— Income  Und  Excess  Profit 

. 

Interest  (Paid  and  Accrued) 

50 

Total 

61 

u 

64 
45 

CAPITAL  CHARC 

Improvements 

DevelopmenU 

Tot 

ES 

...        S 

• 

ti.. 

1 

FoBM  8. — Form  prepared  by  Cost  Accounting  Committee  of  National  Coal 
Association  for  submission  to  Federal  Trade  Commission. 


UNIFORM  ACCOUNTING 


41 


REPORT  ON 

BITUMINOUS  COAL  PRODUCTIOM.  COST  AND  INCOME 

OF 


FOR. 


.19. 


Account                                                                                    INCX)ME 
No. 

56 

57 
58 
59 
60 
61 
62 
63 
64 
65 
66 

COAL  SALES  (ExcloBive  of  Purchaaed  BitumiE 
and  Anthracite) 

ous 

Tons  of  2000  Lbs 

Per  Ton 

Amount 

To  Railroads:- 

^ 

Sbipped 

Other  Shipments:- 
Via  Rail 

Via  Water 

Coal  Coked  (including  Coal  Washed) 

Local  Salcs-ReUil  Sales  at  Mine»-(Net  Return.) 
Power  House  Fuel 

67 

Total  Production  Sales 

« 

» 
• 

68 
69 
70 

Cost  of  Sales. 

Total  Mining  Cost  (Account  No..32) ... 

Inventory  First  of  Month   . . 

! 

« 
* 

4 

• 
• 



- 

- 

— 

— 

71 
72 

Total 

Inventory  Last  of  Month 

73 

Total  Cost  of  Sales 

74 
75 

* 
* 

*  J  J  J 

* 

Deduct  Selling  Cost  (Account  No.  44) 

76 

Income  from  Sales 

• 

,,,, 

* 

77 
78 
79 
80 

11 
83 
84 
85 
86 
87 
88 
89 

Miscellaneous  Income  (Net): 



Standard  Gauge  Railroad  Equipc 
Water  Transportation  Equipmen 

Coke  and  By-Producta 

Washed  Coal 

Purchased  Anthracite 

Purchased  Bituminous 

Dent 



t    ;;:;::  ::":::::;::::::;;:;:.i 

Tons;::::;;:::; :;::;;              :::::::: 1 

Tons 

Tons 

— 

Tons                   '                                                              

total  Miscellaneous  Income  "J 

~90~ 
91 

Total  Income  (Sales  and  Misccllaw 

■ous)                                                                                                     

' 

92 

Net  Income ' 

PRODUCTION  TONNAGE  (2000  Pounds) 

Prepared 

Run-of-Mine 

Slack 

Total 

93 
94 
95 
96 
97 
98 
99 
100 
101 
102 

SALES: 
To  Railroads:- 
At  Tipple 

Shipped 

Other  Shipmenta:— 
Via  Rail 

Via  Water 

Coal  Coked  (incl'g  Co«l  Washed). . 

Power  House  Fuel. 

103 
104 

Total  Sales 

-- 

-- 

Add-Inventory  End  of  Month. . 

105 
106 

Total  .. 

Deduct-Invcntory  First  of  Month 

107 

PRODUCTION 

= 

^ 

^ 

^ 



1    1    1 



_ 

_ 

J 

FoEM  8. — Form  prepared  by  Cost  Accounting  Committee  of  National  Coal 
Association  for  submission  to  Federal  Trade  Commission   (reverse). 


42  BITUMINOUS  COAL  MINE  ACCOUNTING 

In  the  fall  of  1917  the  National  Coal  Association  ap- 
pointed a  Committee  of  competent  accountants  charged 
with  the  duty  of  devising  cost  report  forms  which  would 
give  the  government  the  information  required  for  the  pur- 
pose of  a  study  of  costs  in  connection  with  the  price  fixing 
powers  of  the  Fuel  Administration  and,  at  the  same  time, 
show  true  costs  in  a  manner  which  would  not  work  a  hard- 
ship upon  the  industry.  This  Committee,  after  mature 
consideration,  prepared  a  tentative  short  form  of  report 
which,  in  their  opinion,  would  meet  the  requirements  and 
submitted  it  to  the  Federal  Trade  Commission,  where  it 
received  scant  consideration. 

In  the  winter  of  1918  a  second  committee  was  ap- 
pointed for  further  consideration  of  this  matter.  This 
committee  gave  considerable  time  to  its  study,  and  at  the 
annual  convention  of  the  National  Coal  Association  in 
May,  1919,  submitted  a  tentative  report  which  was  later 
completed  and  adopted  by  the  Directors  of  the  National 
Coal  Association  as  a  standard  for  the  industry.  This 
form  has  been  very  widely  distributed  among  bituminous 
coal  operators  throughout  the  country  and  has  been 
adopted  by  a  large  number  of  them. 

During  the  period  when  the  Federal  Trade  Commis- 
sion was  not  collecting  cost  data,  namely,  the  year  1919, 
the  forms  were  submitted  to  the  economists  and  account- 
ants in  charge  of  the  Coal  Section  of  the  Federal  Trade 
Commission  with  the  advice  that  if  the  system  recom- 
mended obtained  their  approval  the  endorsement  of  the 
entire  coal  mining  industry  might  be  secured.  This  ap- 
proval was  not  forthcoming  and  as  has  been  heretofore 
shown,  the  Commission  issued  a  new  form  of  cost  sheet 
for  use  on  January  1st,  1920.  It  will  thus  be  seen  that 
the  interest  of  the  government  in  coal  costs  has  been  at 
times  beneficial  and  at  times  harmful.  Without  doubt  the 
impetus  given  to  the  study  of  coal  costs  by  the  Commis- 
sion was  in  the  first  instance  helpful  because  probably 


UNIFORM  ACCOUNTING  43 

only  through  necessity  could  the  industry  have  been 
brought  so  quickly  to  the  study  of  costs  and  their  com- 
pilation in  a  uniform  manner.  On  the  other  hand,  the 
unsettled  policy  of  the  Commission  and  the  frequent 
changes  of  forms  wore  out  the  patience  of  coal  producers 
and  made  them  loath  to  adopt  any  uniform  system  of 
cost  determination  until  the  courts  should  finally  pass 
upon  the  right  of  the  Federal  Trade  Commission  to  di- 
rect their  accounting  methods.  Each  of  the  forms  pre- 
pared by  the  Commission  required  some  adjustment  in 
the  classification  of  accounts  by  coal  operators,  and  the 
1920  report  in  particular  required  the  ascertainment  of 
some  portions  of  cost  in  a  manner  which  is  not  entirely 
in  harmony  with  the  opinions  contained  in  the  regula- 
tions of  the  Internal  Revenue  Bureau. 

The  form  recommended  by  the  National  Coal  Associa- 
tion's Cost  Accounting  Committee  will  be  made  the  basis 
of  the  treatment  of  costs  in  the  articles  in  this  book. 

Instructions  for  Compiling  Reports. — The  following 
instructions  for  compiling  reports  are  taken  from  the 
Report  and  Suggestions  of  Committee  on  Standard  Sys- 
tem of  Accounting  and  Analysis  of  Cost  of  Production  of 
the  National  Coal  Association.^ 

MINING. 

(1)  Hand  Mining. 

Miners,  Helpers,  Shot  Firers,  etc. 

(2)  Machine  Mining. 

In  machine  mines  this  item  should  be  subdivided  into  Under- 
cutting AND  Pit  Car  Loading. 
Undercutting  should  be  charged  with — 

(a)  Generation  and  Transmission  of  Power,  i.  e.,  the  propor- 
tionate share  of  Cost  of  power  generated  and  its  transmission 
to  machines  (see  Note  on  Power  below). 

(b)  Maintenance  of  Machines,  i.  e.,  repair  parts,  machine  picks, 

1  Any  one  desiring  to  make  a  study  of  coal  cost  accounting  should  ask 
the  secretary  of  the  National  Coal  Association,  Commercial  Bank  Building, 
Washington,  D.  C,  for  a  copy  of  this  report. 


44 


BITUMINOUS  COAL  MINE  ACCOUNTING 


Report  of  Cost,  Income  and  Tonnage 


For  Month  of_ 


Form  9. — National  Coal  Association  coal  cost  report  blank. 


UNIFORM  ACCOUNTING 


45 


Shesta 

F 

or  Naoe  of  Company 

teport  of  Cost,  Income  and  Tonnage 

F«ir  Month  of 

COST 

Um 

ACCOUNT 

CURRENT     MONTH 

YEAR^TO  DATE 

LABOR        ! 

SUPPUES 

TOTAL 

TOTAL 

Amotint        i 

Amount 

Amount 

Per  Ton 

Amount 

Per  Ton 

33 
84 
35 
36 
37 
38 
39 
40 

Qeiieral  Expense 

Officrt-  Sal.riti  and  Exptnict.. 

nent  iDd  UlmlluiMui  Ofle*  Er- 

41 

ToMt  Central  Expenie 

43 

Total  OperaDng  and  General 
Expenae  (add  Knea  ja  and  41) 

43 
44 
46 
46 
47 
48 
49 
SO 
61 
62 
63 
64 

Sclline  Expense           

Officers'  Salaries  and  Expenaes. . 
Saleamen-a  Salaries  and  Expeoacs 
Other  Office  Salariea           

Rent  and  Oier  Office  Expense. . 

Miscellaneous               

Total  Selling  Expenae 

65 

Total  Operating,  General  ind 
Selling  Expenae  (add  4s  k  5J) 

Form  9. — National  Coal  Association  coal  cost  report  blank  (continued) 


46 


BITUMIN0U8  COAL  MINE  ACCOUNT  IN  a 


Report  of  Cost,  Income  and  Tonnage 

For  Month  o£ 

INCOME 


Coal  Sales 

Salct  Per  Railroad  Weighti. 
Delivered  to  Locomotivet. . . . 

Local  Sale*  at  Mines 

Coal  Coked 

Raw  Coal  to  Wathery 

To  Power  Plant 

To    Dwellings 

Adjusiment  of  Inventories 


Current  Mo.       Year  to  Date.  Amount 


CURRENT  MONTP 


YEAR  TO  DATE 


Qross  Sale*  (produced  coal). 


Deductions  

Less  Freight  Prepaid 
less  Allowances  sod 


Total  Deductions. 


Net  for  Coal  at  Mine 

Less  Total  Operating  Charges  (line  ss). 


Margin  on  Coal. 


Other  Income 

Profit  or  Loss,  Expio 


Heat,  Light  and  Power 

Dwellings  and  Farms 

Stores   

Profit  or  Loss,  Washer  Operatioo*. 

Profit  or  Loss,  Coke  Plaat 

Floating  Equipment 

Railroad   Euipment 

Purchased  Coal 


Total  Miscellaneous  Income 


Gross  Income.    (Add  lines  74  anH  l«>. 


Charges  to  Income  Ds4uctlble  for  Federal  Taxes  . 

Interest  (Paid  or  accrued) 


Cbsrges  to  Income  Not  DsdiKtIble  (or  Federal  TsYea 

Income  and  Bfxcess  Profits  Taxes 

Cootingent  Reserve  (Mining  hazard) 

Maiatenaoce  Reserve 


Total  Charges  to 


Net  Income  (Subtract  98  from  89) . 


Taxable  Net  Income  (Subtract  91  fm-i  330 


Form  9.— National  Coal  Association  coal  cost  report  blank  (continued) 


UNIFORM  ACCOUNTING 


47 


WieM  4 

For  Mum  e(  Coapuy 

Report  of  Cost,  Income  and  Tonnage 

Tonnage  Statement— Nc 

(Report  put  ton 

Ifnr  Month  of 

5t  Tons  of  2000  Pounds 

1  as  <lecim«l8) 

CURRENT    MONTH                                                          I 

llHfc. 

Di.powtion  Mide  of  Coal 

Prepared 

Mine  Run 

Screenino 

Total 

101 
102 
103 
104 
105 

loe 

107 
108 
109 

no 

Invoiced  to  Cuatomei*- 

- 

Departmeat.1  Traiuler*- 
Coil   Coked 

To  Power  Plant  .... 

To  Dwelliogt 

111 

Add  Eflmiied  Inventory-To.l  OD  Hand 
and  Rolling  Law  of  thia  Month 

113 

Total 

114 

Deduct  Ettiinated  iDventoiy  —  Coal  oa 
Hand  and  Rolling  First  of  Month.... 

116 

Total  Production  (Diriaor  for  Cost).. 

THIS    YEAR    TO    DATE                                                  | 

UMb. 

Ditpoaition  Made  of  Coal 

Prepared 

MioeKoa 

Scraenings 

TotJ 

101 
102 
103 
104 
105 
106 
107 
108 
109 

Invoiced  to  Ctutomers— 

Sale*  per  Railroad  Weighti 

Coal   Coked 

To  Dwelllnga 

110 

HI 

and  Rolling  U«  of  thi.  Month 

113 

114 

Deduct  Eitimated  loTentory  —  Coal  co 
Hand  and  Rolling  First  of  Moai<i.... 

116 

Totai  Ptoduction  (Divisor  for  Cost).. 

FoBM  9. — ^National  Coal  Association  coal  cost  report  blank  (continued) 


48 


BITUMINOUS  COAL  MINE  ACCOUNTING 


SHORT  FORM 


.Coal  Compant 


Income  Statement,  Month  of 

-,  1919. 

Tons  of  Coal  Produced,  realizing  net  at  n 

General  Expense 

Administration  expense 

' 

Selling  Expense 

All  expenses  of  sales  department 

Mine  Operating  Expense 

(a)   Wages  and  compensation  of  all 
employees  in  and  about  the  mine 

(b)   Material  and  supplies- 
All  material  and  supplies  con- 

Employer's  Liability 

Premiums  on  policies  if  insurance  is  carried,  or  such  pro- 
vision as  may  be  made  therefor,  if  no  insurance  is  carried. 

Fire,  Boiler  and  Tornado  Insurance 

Premiums  on  policies,  or  provision  if  self-ins 

Depreciation  and  Depletion 

A  de6nite  provision,  preferably  a  fixed  charg 

ured 

e  per  ton  to 

Taxes 

Proper  provision  for  Federal,  State  and  Local  Ta; 

Interest 

Interest  accrued  on  outstanding  interest-bearing  o 
tions  or  other  interest  paid  during  the  period  cover 
the  cost  sheet.           

bliga- 
edby 

Total                     



Total  Income  for  Month 



Net  Income  for  Month 



Form  9. — National  Coal  Association  coal  cost  report 
blank  ( concluded ) . 


UNIFORM  ACCOUNTING  40 

cable  for  electric  machine,  and  air  hose  for  air  machines.  Shop 
and  repair  men  employed  on  machines  and  labor  of  blacksmiths 
sharpening  or  making  bits  and  such  part  of  the  time  of  head 
electrician  spent  in  maintenance  of  machines, 
(c)  Operating  Machines:  To  this  subdivision  should  be  charged 
the  wages  of  Machine  Runners  and  Helpers,  Bit  Carriers,  oil, 
grease  and  waste,  oil  cans,  hand  picks,  pick  handles,  jacks,  ma- 
chine shovels,  etc.,  etc.  If  machines  are  not  equipped  with  self- 
propelling  trucks  and  the  machines  are  moved  about  their  terri- 
tory by  mule  haulage,  such  haulage  should  be  charged  to  operat- 
ing machines. 
Pit  Car  Loading  needs  no  comment. 


TIMBERING. 

Though  Timbering  is  imposed  by  physical  conditions  and  is  closely 
incident  to  work  at  the  face,  it  is  a  significant  item,  and  should  stand 
by  itself.  To  this  subdivision  should  be  distributed  wages  of  timber- 
men  and  helpers,  the  cost  of  props,  cap  pieces,  cross  bars  and  other 
timber  used  in  advancing  work,  such  cost  including  freight  and  the  cost 
of  unloading  and  handling  at  the  mine,  with  the  expense  of  preparing 
and  delivering  to  the  working  face. 

DEADWORK. 

As  every  mine  presents  physical  conditions  peculiar  to  itself,  no  two 
mines  being  alike,  and  as  the  physical  conditions  fluctuate  as  the  work 
progresses,  in  order  to  work  out  comparable  statements  and  records^ 
Deadwork  should  be  classified  in  accordance  with  its  nature,  such  as 
yardage,  premium  for  naiTow  work,  shooting  rock,  lifting  bottom,  tak- 
ing down  top,  stowing  and  dumping  gob,  cleaning  up  falls  and  re- 
timbering  after  them,  handling  squeezes,  mine  fires,  or  any  other  work 
imposed  by  adverse  physical  conditions. 

TRACKLAYING. 

While  track  is  immediately  connected  with  and  necessary  for  the 
transportation  of  coal  to  the  shaft  bottom,  and  hence  a  necessary  item 
incident  to  Haulage,  it  has  long  been  regarded  as  a  significant  item  in 
the  cost  sheet,  and  should  stand  by  itself. 

To  this  account  should  be  charged  rails,  ties,  spikes  and  fastenings, 
and  the  labor  of  grading  roads  and  tracklaying  in  advancing  work. 
Repairs  to  track  should  be  charged  to  Haulage  and  Hoisting  under 
Maintenance  of  Way. 

Purchases  of  track  material  should  be  charged  to  Track  Material 
Account,  and  as  the  material  is  taken  into  the  mine  it  should  be  credited 
and  charged  Tracklaying. 


50  BITUMINOUS  COAL  MINE  ACCOUNTING 

DRAINAGE. 

To  this  subdivision  should  be  charged  the  cost  of  labor  employed  in 
connection  with  the  ordinary  removal  of  water  from  the  workings  of 
the  mine,  with  the  expense  of  repairs  and  maintenance  of  pumps,  pipe 
lines,  drains;  also  the  proper  proportion  of  power  used.  In  some  regions 
and  in  deep  mines  the  tonnage  of  water  handled  and  consequent  con- 
sumption of  power  is  very  heavy. 

In  the  event  of  a  flood  or  extraordinary  inflow  of  water,  the  expense 
of  recovering  the  mine  or  flooded  workings  should  be  shown  as  a  special 
and  separate  charge  to  Operating  Account. 

VENTILATION. 

To  ventilation  should  be  charged  proper  proportion  of  Power  Ex- 
l^ense  to  represent  power  used  in  driving  fans.  If  cross-cuts  are  driven 
narrow  because  of  physical  conditions,  the  yardage  should  be  charged 
under  Deadwork. 

Labor  and  material  used  in  closing  cross-cuts,  constructing  overcasts, 
mine  doors,  curtains  and  brattice,  should  be  charged  to  Ventilation ;  also 
expense  of  cleaning  and  repairing  air  courses.  Repairs  and  lubrication 
of  fan  and  fan  engine,  pressure  gauges,  etc.,  etc.,  should  be  charged  to 
Ventilation. 

While  trappers  are  rendered  necessary  in  connection  with  ventilation 
doors,  their  work  is  incident  to  haulage  of  coal,  and  their  wages  should 
be  charged  to  Hauling  and  Hoisting  under  Conducting  Transportation. 

HAULAGE  AND  HOISTING  should  be  separated  into— 

1.  Generation  and  Transmission  of  Power. 

The  proportion  of  expense  of  generating  power  (as  set  forth  in 
note)  and  the  construction  and  keeping  up  of  transmission  lines  and 
haulage  circuits. 

2.  Care  and  Maintenance  of  Equipment. 

(a)  Hoisting  and  haulage  engine  repair  parts,  lubricants,  pack- 
ing and  waste,  and  wages  of  hoisting  engineer  and  mechanics 
employed  in  care  and  repair.  Hoisting  and  haulage  ropes,  cage 
repairs,  and  replacements;  safety  devices,  guides  and  sheaves. 

(b)  Care  and  maintenance  of  motors. 

When  motor  haulage  is  used,  repair  parts  and  labor  of  care 
and  repair. 

(c)  Care  and  maintenance  of  pit  cars. 

Labor  and  material  used  in  keeping  pit  cars  in  repair.  New 
cars  replacing  wrecked  or  worn-out  cars,  also  additional  cars 
necessary  to  maintain  output  by  reason  of  increasing  length  of 
haul  after  mine  has  reached  its  contemplated  output  capacity. 


UNIFORM  ACCOUNTING  51 

(d)  Care  and  maintenance  of  live  stock. 

Harness  and  stable  supplies. 

Grain  and  hay,  and  wages  of  stablemen  and  veterinary,  clip- 
ping and  shoeing,  etc.  New  mules  replacing  killed  or  worn-out 
mules  should  be  charged  to  maintenance  of  live  stock. 

3.  Conducting  Transportation. 

Drivers,  Boss  Drivers,  Motormen,  Trip  Riders,  Couplers,  Cagers 
and  Pushers,  Oilers  (oil  and  grease).  Trappers  and  Switch  Throwers, 
Jackmen,  and  that  part  of  Hoisting  Engineer's  wages  not  charged  to 
Maintenance  and  Repairs. 

4.  Maintenance  of  Way. 

Repairs  to  roads,  cleaning  roads,  relaying  track,  new  ties,  rollers 
for  rope  haulage,  etc.,  etc. 

DUMPING  AND  TALLYING. 

Top  Cagers,  Pushers  and  Dumpers,  Weigh  Boss,  Check  Puller  and 
Track  Weighman. 

PREPARATION. 

The  proportion  of  power  used  in  operating  screens,  crushei's,  ele- 
vators, conveyors,  picking  tables,  spiralizers,  loading  booms,  etc.,  and 
the  cost  of  the  labor  of  attendants  thereon,  such  as  Inspectors,  Dock 
Bosses,  Sulphur  and  Slate  Pickers,  and  the  labor  of  disposing  of  waste, 
all  material  and  labor  involved  in  the  maintenance  of  repairs  and  re- 
placements of  such  apparatus  as  are  used  in  the  preparation  of  coal. 

If  a  Washer  is  operated,  such  investment  and  its  operation  should 
stand  by  itself.  The  Washer  should  be  charged  with  the  expense  of 
operation,  repairs,  maintenance,  insurance  and  its  proper  depreciation, 
with  the  value  of  the  raw  coal  passed  through  it,  either  at  cost  of  pro- 
duction, or,  preferably,  at  the  market  value  obtainable  for  raw  coal,  and 
credited  with  the  out-turn  of  washed  product. 

If  the  result  is  a  credit  balance,  it  should  be  taken  into  operating- 
income  as  net  income  from  Washer;  if  it  results  in  a  debit  balance,  it 
should  be  deducted  from  operating  income  as  loss  on  Washer  operations. 

RAILROAD  CAR  LOADING  AND  YARD  EXPENSE. 

To  this  subdivision  should  be  charged:  Wages  of  Yard  Boss,  Car 
Cleaners,  Trimmers,  Car  Riders,  Car  Haulers,  Brakemen,  and  all  ma- 
terial and  supplies  used  by  them. 

The  expense  of  maintaining  and  operating  mine  tracks,  if  a  switch 
engine  is  employed,  or  if  switching  is  done  by  the  railroad  for  which 
a  special  charge  is  made,  distinct  from  the  freight  rate,  the  expense 
thereof  should  be  charged  to  this  subdivision. 


52  BITUMINOUS  COAL  MINE  ACCOUNTING 

POWER. 

The  generation  and  transmission  of  power  is  about  the  only  expense 
about  a  coal  mine  that  is  not  in  total  directly  chargeable  to  some  one 
subdivision  of  operating  work.  To  generation  and  transmission  of  power 
should  be  charged  the  wages  of  Firemen,  Fuel  Men,  Ash  Haulers,  Water 
Men,  Pump  Men,  Generator  and  Compressor  Attendants,  and  such  part 
of  Hoisting  Engineer's  and  Electrician's  time,  or  other  labor  and  ma- 
terial, as  may  be  employed  in  the  care,  repair  and  maintenance  of  boil- 
ers, pumps,  engines,  generators,  air  compressors  or  other  power-gen- 
erating machinery;  wire  and  pipe  used  in  transmission  lines,  cost  of 
water  supply  and  all  coal  consumed.  If  an  unmerchantable  product  is 
used  under  the  boilers,  it  should  be  charged  at  its  cost  of  production. 
If  cost  of  fuel  is  not  included  in  cost  of  power,  the  accounts  do  not 
exhibit  true  cost.  The  true  cost  should  be  before  the  operator  to  induce 
him  to  estimate  the  possibilities  of  effecting  savings  by  improving  his 
plant  or  boiler  room  practice;  also  to  estimate  the  possibility  of  effect- 
ing economy  by  purchasing  power  of  outside  service  companies,  or 
through  establishing  central  power  plants.  The  tonnage  consumed  per 
annum  under  own  boilers  by  large  producers  is  very  large,  and  the  cost 
thereof  should  be  clearly  shown. 

If  outside  power  is  purchased,  it  should  be  charged  to  Power. 

The  expense  of  power  should  then  be  distributed  to  the  different  sub- 
divisions of  Operating  Expense,  in  accordance  with  the  proportion  of 
power  employed  in  each  section  of  the  work. 

Mining,  under  the  subdivision  Undercutting,  should  be  charged  with 
the  proportion  of  power  applied  to  machine  operation. 

Haulage  and  Hoisting  should  be  charged  under  Generation  and 
Transmission  of  Power,  with  its  proportion  of  power-house  expense,  as 
represents  the  power  used  by  hoisting  engines  and  haulage  engines  and 
motors. 

Under  the  subdivision  Preparation  should  be  charged  the  power  used 
for  shaker  screens,  picking  tables,  etc.,  etc. 

Ventilation  should  be  charged  with  the  share  of  expense  of  power 
house,  in  accordance  with  the  power  used  for  driving  fans. 

Drainage,  with  the  proper  proportion  of  power  used  in  pumping 
water  from  the  mine. 

The  above  suggestion  that  the  expense  of  power  should  be  distributed 
to  the  various  subdivisions  of  the  work  may  appear  difficult  to  the  ac- 
countant, and  in  small  operations  such  distribution  may  be  a  needless 
refinement;  and  in  such  cases  power  may  well  be  shown  as  an  undis- 
tributed item  of  operating  expense. 

However,  in  large  operations,  the  cost  of  power  is  a  large  item,  and 
the  making  up  of  a  heat  and  steam  balance  will  not  be  difficult  to  the 
well-informed  engineer  or  electrician. 


UNIFORM  ACCOUNTING  53 

The  measurement  of  fuel  and  water  and  steam  generation,  compared 
with  the  useful  work  being  done,  will  prove  fruitful  in  results.  Such 
time  and  effort  is  well  spent,  as  it  leads  up  to  the  detection  of  steam 
line  leakages,  engine  cylinders  and  valves  in  bad  condition,  insufficient 
power  circuits,  bad  track  bonding,  etc.,  etc.  The  coal  operator  who 
wastes  coal  by  overlooking  preventable  losses  is  like  the  merchant  who 
consumes  his  own  stock. 

David  Moffat  Myers,  in  his  very  lucid  and  valuable  book  entitled 
"Preventing  Losses  in  Factory  Power  Plants,"  well  says:  "Just  as  the 
expert  accountant  is  able  to  analyze  the  expenditure  of  one  hundred 
dollars  in  a  business  enterprise  and  to  show  where  some  of  them  are 
wasted  or  misspent,  and  finally  to  strike  a  true  balance  between  income 
and  expenditure,  just  as  truly  and  with  as  great  a  degree  of  accuracy 
a  trained  engineer  may  analyze  and  balance  the  expenditure  of  energy 
from  the  original  one  hundred  per  cent  income  or  input,  to  the  final 
machine  horsepower  hours  of  useful  work,  and  in  so  doing  he  may 
point  out  where  certain  portions  of  this  energy  are  misspent  or  wasted, 
and  how  they  may  be  saved  and  converted  into  useful  work." 

"There  does  not  exist  a  power  problem  that  is  not  capable  of  solu- 
tion by  the  intelligent  application  of  these  principles  of  analysis." 

REPAIRS  TO  BUILDINGS  AND  STRUCTURES. 

To  this  item  should  be  charged  labor  and  material  used  in  repairs  of 
permanent  buildings  and  structures  of  the  surface  mining  plant. 

SUNDRIES. 

Small  and  unimportant  items  of  expense  not  easily  distributable  to 
the  above  subdivisions  of  Expense. 


CHAPTEE  II 
THE  MINE  TONNAGE  RECORD 

The  starting  point  of  all  operating  activity  is,  of 
course,  the  mine  and,  as  far  as  the  accounting  proposition 
is  concerned,  usually  three  persons  there  are  directly  or 
indirectly  responsible  for  the  correctness  of  the  accounts. 
They  are : 

1 — Weighmaster ;  2 — Mine  Foreman;  3 — Mine  Clerk. 

The  ton  being  the  unit  of  production  in  bituminous  coal 
mining,  we  will  first  consider  the  work  of  mine  weigh- 
master. It  devolves  upon  him  to  properly  weigh  and 
record  daily  the  coal  produced.  In  certain  fields  there  is 
a  check  upon  the  accuracy  of  his  record  due  to  the  em- 
ployment by  the  miners  of  a  check-weighman,  the  total 
credits  to  each  miner  each  day  being  compared  by  these 
two  men,  one  the  employee  of  the  owner  or  operator,  the 
other  the  employee  of  the  men. 

The  weighmaster 's  records  are  properly  the  control 
account  and  must  be  so  kept  as  to  indicate  the  number  of 
mine  wagons  produced  each  day  by  each  miner,  with  the 
individual  weights  of  each  one,  in  the  districts  in  which 
tonnage  is  the  basis  of  payment.  In  districts  where  the 
mine  wagon  is  the  unit  of  payment,  this  record  shows  the 
number  of  such  cars  produced.  Such  records  are  usually 
made  up  in  large  size  sheets  17  x  22  in.  or  19  x  28  in., 
preferably  on  good  stout  paper  adapted  to  pencil  writing, 
showing  in  the  proper  columns  the  credit  to  each  miner. 

It  is  the  custom  in  most  mines  to  designate  miners  by 
numbers,  they  being  given  a  set  of  brass  or  other  metallic 
pit  checks,  one  of  which  is  placed  on  each  car  sent  out  of 
the  mine,  and  from  which  the  record  of  the  person  who 
produced  the  coal  is  obtained. 

54 


THE  MINE  TONNAGE  RECORD 


55 


The  Tipple  Sheet. — Such  a  form,  which  we  will  for 
convenience  call  a  tipple  sheet,  is  reproduced  in  Form  10. 

Since  coal  produced  by  mining  pick  and  that  produced 
by  machine  mining  carry  different  rates  of  compensation 
it  is  necessary  that  in  the  totals  of  this  sheet  such  a  sub- 
division be  made.  This  is  most  easily  accomplished  by 
assigning  a  certain  series  of  check  numbers  to  pick 
miners  and  another  series  of  check  numbers  to  machine 
miners  or  those  loading  after  cutting  machines.  In  the 
case  of  the  latter  other  sub-divisions  may  well  be  made 


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59 

60 

61 

62 

iLi 

2    93 

94 

95 

o» 

97 

96   99 

lOO 

L_LJJ_iJ 

=1= 

^ 

= 

==: 

k-K 

i 

— 

""TTT- 

^=F- 



— 

— 

^'^ 

^  — 

H-h 

f 

h 

^'^"^  v>^;9KMo.te.    1 

Form  10. — Tipple  s'.ieet  blank. 

to  show  the  tons  cut  by  each  machine.  The  tons  credited 
to  the  cutters  will  always  equal  the  tons  credited  to  load- 
ers when  both  classes  of  men  are  paid  upon  the  tonnage 
basis. 

It  is  necessary  that  the  weighmaster  be  informed  by 
the  mine  foreman,  or  whoever  employs  the  men,  as  to 
the  nature  of  the  work  to  be  performed  by  the  miners; 
that  is,  whether  a  new  man  is  employed  as  a  pick  miner, 
as  a  cutter,  or  as  a  loader  after  machine.  This  is  neces- 
sary because  each  of  these  occupations  pays  a  different 
rate  per  ton. 

If  a  man  has  been  employed  in  pick  work  and  is  trans- 
ferred to  work  of  loading,  immediate  notice  must  be 
given  to  the  weighmaster  of  such  a  change  in  occupation. 


56  BITUMINOUS  COAL  MINE  ACCOUNTING 

It  is  generally  well  that  the  miners'  check  numbers  be 
assigned  by  the  weighmaster.  The  best  method  of  carry- 
ing this  out  is  to  have  the  mine  foreman,  or  whoever  em- 
ploys the  operative,  inform  the  weighmaster,  in  writing, 
that  John  Doe  has  been  employed  on  a  certain  date  and 
request  that  he  be  assigned  a  number  and  given  a  set 
of  checks,  the  mine  foreman  stating  whether  the  work  to 
be  done  is  pick  or  machine  mining.  A  suggested  form  for 
transmitting  this  information  follows : 


Mine 191 .... 

To 

Superintendent 

Company 

Dear  Sir: 

The  Bearer,   ,  Address   ,  desires 

employment  as  at  your  mine. 

'.".'.'.'.'.  V. ". '.*'.'.'.".'.'.'.'.  V.'.V.V.y.'.  Title 


Checks  furnished  ,  Amount  charged   

Mr ,  Weighmaster 

Dear  Sir: 

machine 
Please   furnish   him   with   a   set   of        pick        checks.    Rate 

cutting 
for  coal  


Superintendent 

Check  number  furnished   

Where  last  employed ,  Nationality 

Certificate  No ,  Age ,  Height ,  Weight 

Complexion    ,  Mining  experience    

Married  or  single    ,  Characteristics   


Form   11. — Miner's  Employment  Slip  and  Check  Requisition. 

This  form,  it  will  be  noticed,  can  be  used  for  the  pur- 
pose of  indicating  the  former  experience  and  place  of 
work  of  the  man  employed.  The  weighmaster  should 
note  on  the  form  the  serial  number  of  the  checks  assigned 
to  the  miner  and  at  the  close  of  that  day  transmit  the 
mine  foreman's  order  attached  to  his  tipple-sheet  to  the 
mine  clerk  that  in  connection  with  the  entry  of  this  man's 
name  upon  the  payroll  he  also  may  have  information  as 
to  the  kind  of  work  to  which  the  new  employee  is  as- 
signed. 


THE  MINE  TONNAGE  RECORD 


57 


It  may  here  be  noted  that  in  Illinois  and  possibly  in 
some  other  States,  the  law  requires  that  each  miner  so 
employed  must  have  a  certificate  of  competency,  and  for 
that  reason  the  space  is  provided  ^  *  Certificate  No " 

In  connection  with  the  proper  reporting  of  the  tonnage 
produced  by  miners  in  order  to  avoid  over-payments  or 
under-payments  because  of  different  mining  rates  for 
pick  and  machine  mined  coal,  when  men  are  transferred 
from  one  class  of  mining  to  another,  the  mine  foreman 
should  notify  the  weighmaster  of  such  a  change  in  occu- 
pation. A  very  simple  form,  along  somewhat  the  follow- 
ing lines,  will  answer : 


Weighmaster. 
John  Doe  jj,  J^\^j„g    check  No ,  is  trans- 
ferred   to    jjjJpj^ijjg    mining.      Please    assign    him 
another  number. 

Mine  Foreman. 
Assigned  check  No 

Weighmaster. 


FOBM  12. — ^Notice  to  Weighmaster  of  Change  of  Miner's  Number. 

This  form,  after  having  been  noted  by  the  weighmaster 
and  his  classification  of  the  employee  having  been 
changed,  should  be  attached  to  his  tipple  sheet  and  sent 
at  the  close  of  the  day  of  receipt  with  the  tipple  sheet  to 
the  pay-roll  office.  It  then  becomes  a  notice  to  the  mine 
clerk  of  the  change  in  rate.  Where  pay-roll  auditors  are 
employed  they  should  carefully  check  this  notice  covering 
change  in  rate  to  see  that  necessary  changes  in  classi- 
fication have  been  made. 

In  addition  to  weighing  the  coal,  the  weighmaster  is 
usually  charged  with  responsibility  for  showing  what  dis- 
position was  made  of  the  product.  He  should  show  on 
his  tipple  sheet  daily  before  turning  it  over  to  the  pay- 


58 


BITUMINOUS  COAL  MINE  ACCOUNTING 


roll  clerk  all  of  the  necessary  data  indicating  the  total 
pick,  machine,  ^'company,''  and  no  credit  coal  produced, 
how  it  was  used,  etc.,  something  in  the  following  manner : 


Recapitulation 
All  Figures  Cwts. 

Pick    

Machine  ...... 

Company    

No   Check    

R.  R.  Cars    

Mine   Fuel      .  .  . 

R.  R.  Engines 

Houses   

No  Check  Credited 
Wrecked  Cars  .... 

Total 

Total   

Signed     

Weighmaster. 

Form   13. — Weighmaster's  Daily  Report  Blank. 

This  recapitulation  may,  for  convenience,  be  printed  on 
the  corner  of  the  tipple  sheet  itself  and  should  be  signed 
by  the  weighmaster  since  he  is  the  only  man  who  knows 
what  disposition  is  made  of  the  coal  and  is  responsible 
for  its  proper  report. 

Where  the  coal  is  dumped  directly  over  the  screen  or 
from  the  weigh-pan  into  the  railroad  car  and  it  is  possible 
to  obtain  such  a  record,  a  check-sheet  should  be  carried 
showing  how  much  coal  is  loaded  in  each  railroad  car 
placed  under  the  tipple.  This  check-sheet  should  show 
the  number  of  the  miner  who  produced  the  coal  and  the 
weight  of  each  mine  car.  The  aggregate  weights  of  a 
number  of  mine  cars  dumped  into  this  railroad  car  shows 
the  total  pay-roll  weight  of  coal  thus  dumped.  Such  a 
check  sheet  is  illustrated  in  Form  14. 

If  the  coal  shipped  is  mine-run,  the  wage  scale  being 
the  same,  and  the  loading  equipment  will  permit  such  a 
record,  a  direct  comparison  can  thus  be  had  between  the 
aggregate  of  these  mine  car  weights  and  the  railroad 


THE  MINE  TONNAGE  RECORD 


59 


Aveight  of  coal  loaded  in  any  given  car  as  afterwards  as- 
certained by  weighing  on  railroad  track  scales.  If  other 
grades  of  coal  are  loaded,  statistics  kept  for  that  purpose 
will  very  soon  show  what  should  be  the  relative  weight  of 
the  grade  other  than  that  upon  which  the  wage  scale  is 
based,  as  a  check  upon  the  railroad  weight. 

After   completing   all   these   records   they   should  be 


rmifPAVv 

Forward  Sheet  When  Mine  is  Idle,  Noting 

EIGHMASTEK'S  CHECK  SBLEET 
:"  Nothing  to  Report" 

MTXFCl                                                                                  101 

. 

Grade 

1 

Initial 

Number 

Kind  of  Car 

Capacity 

Light  Wcijiit 

'       Loading 

^l 

_ 







= 

__^ 

i 

' 

1 1 

1 

Total  Weight 

Total  Wagons 

!ll 

FoBM  14. — Weighmaster's  check  sheet. 

turned  over  to  the  payroll  clerk,  where  they  become  the 
basis  of  his  payroll  entry. 

The  total  of  the  weights  of  the  contents  of  mine  cars 
dumped  into  railroad  cars,  as  ascertained  from  this  com- 
pilation, must  agree  with  the  amount  shown  by  the  weigh- 
master's  recapitulation  on  the  tipple  sheet  as  *^Coal 
Loaded  Into  Kailroad  Cars." 

The  pay-roll  clerk,  having  received  from  the  mine 
weighmaster  a  record  of  the  coal  loaded  by  each  miner, 
enters  the  total  daily  credits  of  each  miner  on  his  pay- 
roll.   Before  doino:  so  he  should  see  that  the  statement 


60 


BITUMINOUS  COAL  MINE  ACCOUNTING 


showing  production  has  been  properly  balanced  against 
that  showing  disposition.  It  is  necessary  that  some 
forms  be  prepared  to  bring  together  in  semi-monthly 
totals  the  entire  production  and  disposition  figures.  For 
this  purpose  a  coal-proof,  ruled  to  show  a  concise  tabu- 
lation is  convenient,  similar  to  Form  15. 

This  form  can  conveniently  be  combined  with  the  sup- 
plementary report  of  coal  produced,  covering  deliveries 
to  railroad  locomotives,  miners'  houses,  local  sales,  etc. 
More  fully  treated  under  ^* Sales  Statistics'*  in  a  later 
chapter. 


"~" 

Mine 

rOAl    PROOF      Month  of 

192 

All  figures  repreaent  cwts. 

>rtr» 

r^ 

^^ 

F^^^ 

No  check 

fe^<£U.n  PRCc. 

-^ft-e. 

-m". 

"o?^^^^^ 

e;i 

T 

2 
3 

^ ^ 

f — ^ 



■  """^^ 

, 

16 

— 



.— — «^<-. 

:=3i=^ 

^ 

f" — 1 

z:r: : 

■''"■""'""■^ 

i:lj^ 

— 

Form  15. — Coal  proof. 

The  totals  of  the  coal  produced  during  these  semi- 
monthly periods  can  be  readily  combined  in  order  to 
make  any  statistical  reports  required  showing  a  month's 
production.  The  aggregate  individual  items  as  carried 
to  the  pay-roll,  when  totaled  for  each  of  these  semi- 
monthly periods,  must  balance  with  the  coal  proof,  which 
is  in  effect  a  *' control"  account. 

The  daily  report  of  cars  shipped,  which  will  be  handled 
in  a  later  paper,  should  carry  a  column  to  indicate  the 
mine  weight  of  the  coal  loaded  in  each  individual  railroad 
car.  The  totals  of  this  column,  accumulated  for  the 
month,  taking  into  consideration  the  part  loads  at  the  be- 
ginning and  end  of  the  month,  will  again  check  the  total 
production  as  carried  on  the  coal  proof,  again  taking  into 
consideration  the  difference  between  the  *'no  check"  coal 


THE  MINE  TONNAGE  RECORD  61 

(that  coming  out  of  the  mine  without  a  proper  miner's 
check)  debited  and  credited. 

To  insure  a  proper  check  upon  the  quantity  of  coal 
delivered  direct  from  the  mine  in  wagon  lots  to  tenants 
and  other  purchasers  it  is  important  that  orders  for  such 
deliveries  uniformly  originate  at  the  mine  office,  and  be 
transmitted  to  the  proper  person  charged  with  the  deliv- 
ery of  such  coal   (usually  the  weighmaster  or  outside 

No.1375.1.  19 

* Outside  Foreman  or  Weighmaster 

Deliver  to „ House  No Check  No 

ONE  LOAD  f;«,p  COAL  and  attach  this  order  to  your  coal  sheet  on  the  day  of  delivery. 

_.    ,^ Scrip  Clerk 

Ooal$ Hauling! ^ 

Form  16. — Retail  delivery  slip  and  order. 

foreman)  in  writing.  Such  an  order  becomes  his  voucher 
for  the  delivery.  It  should  be  returned  to  the  mine  office 
each  day  attached  to  the  weighmaster  *s  tipple  sheet,  the 
aggregate  tonnage  equaling  the  quantity  reported  on 
that  sheet  as  sold  locally. 

When  so  received  by  the  payroll  clerk  it  is  the  basis 
of  his  charge  to  the  purchaser.  A  simple  form  of  such 
order  is  illustrated  in  Form  16.  If  prepared  for  use  with 
carbon  paper  and  printed  in  multiple  on  sheets  8%  x  13 
in.  it  will  make  a  very  convenient  record.  Notation 
should  be  made  on  carbon  copies  showing  date  of  deliv- 
ery, or  the  returned  order  may  be  pasted  back  on  the  stub 
for  that  purpose. 


CHAPTER  III 
THE  DAY  LABOR  RECORD 

On  the  mine  foreman  usually  devolves  the  duty  of  keep- 
ing a  regular  and  systematic  report  of  the  time  worked 
by  day  men.  In  some  large  organizations  the  operating 
department  has  made  it  a  rule  that  only  the  mine  fore- 
man be  allowed  to  keep  time.  In  other  organizations  time 
is  kept  in  the  inside  by  the  mine  foreman  or  assistant 
foreman  and  on  the  outside  by  an  outside  foreman.  Con- 
ditions at  each  mine  or  with  each  company  frequently  jus- 
tify a  departure  from  the  first  mentioned  method. 

That  the  record  may  be  kept  systematically,  it  is 
usually  advisable  for  the  payroll  clerk,  or  some  other 
employee  charged  with  that  duty,  to  lay  out  the  time 
book,  under  proper  sub-headings,  in  the  method  in  which 
time  is  to  be  reported  and  in  a  method  which  lends  itself 
to  ready  transfer  of  data  to  daily  cost  sheets  or  to  the 
payroll  summary.  This  can  usually  be  done  before 
the  close  of  one  pay  period  for  the  next  one  and  even  the 
names  of  employees  may  be  written  in  by  the  clerk  on  the 
time  book  which  is  kept  by  the  mine  foreman,  although 
some  operations,  for  safety  in  auditing  and  that  names 
may  not  be  added  by  unauthorized  people,  require  all  of 
the  names  on  the  time  book  to  be  in  the  handwriting  of 
the  timekeeper.  This  last  is  a  wise  precaution,  providing 
the  timekeeper  has  been  trained  to  work  out  his  time  book 
in  a  neat  and  legible  manner. 

For  convenience,  two  time  books  should  be  used;  one 
for  the  first  half  of  the  month,  the  other  for  the  second 
half.  They  should  be  of  a  convenient  size  that  they  may 
be  carried  in  the  pocket  of  the  timekeeper.  They  should 
be  so  ruled  as  to  show  the  name  (for  convenience,  the  sur- 

62 


THE  DAY  LABOR  RECORD  63 

name  first),  rate  per  day,  the  hours  worked  daily  and  the 
amount  of  earnings  for  the  period. 

It  is  desirable  that  at  the  head  of  the  page  provision  be 
made  so  that  the  number  of  hours  worked  by  the  mine 
(measured  by  the  period  dumping  coal)  will  be  shown. 
A  comparison  of  these  figures  with  the  amount  of  time 
reported  as  being  worked  by  the  various  employees  will 
immediately  indicate  whether  the  employee  worked  a 
full  day,  was  released  before  the  expiration  of  the  day, 
or  worked  overtime. 

By  examining  the  time  books,  which  he  should  do  fre- 
quently, the  superintendent  can  readily  ascertain  by  this 
comparison  whether  any  favoritism  is  being  shown  by 
the  mine  foreman  or  other  foremen  toward  certain  em- 
ployees by  giving  them  employment  beyond  the  average. 
The  superintendent  and  the  mine  auditors  are  also  given 
an  opportunity,  through  this  method,  of  checking  up  vio- 
lations of  the  wage  scale.  Mine  foremen  have  been 
known  to  allow  nine  or  ten  hours  a  day  in  an  eight-hour 
field  for  eight  hours'  work  and  thus,  in  effect,  increase 
the  wage  rate.  For  this  reason  the  management  should 
insist  upon  an  explanation  of  all  overtime. 

Another  abuse  frequently  indulged  in  is  the  notation 
on  time  books,  with  a  corresponding  allowance,  **  Short 
Last  Pay.''  Investigation  of  a  number  of  these  cases  by 
operators  has  shown  that  frequently  they  were  made  to 
cover  compensation  other  than  time.  Of  course,  some- 
times these  allowances  are  entirely  legitimate;  at  other 
times  auditors  have  found  them  a  mere  subterfuge  to 
cover  unauthorized  payments.  For  this  reason,  where  a 
notation  appears  indicating  a  shortage  in  a  previous 
pay  period,  the  timekeeper  should  be  required  to  state 
the  date  upon  which  the  service  was  performed,  and  the 
payroll  clerk,  by  reference  back  to  the  time  book  for  that 
period,  may  readily  determine  whether  the  allowance  is 
one  for  omitted  time  or  is  some  other  allowance. 

There  is  illustrated  by  using  the  *^ haulage"  schedule 


64 


BITUMINOUS  COAL  MINE  ACCOUNTING 


of  the  National  Coal  Association's  recommended  form 
of  cost  sheet,  a  method  of  "blocking  out"  the  time  book. 
(For  complete  schedule  see  ''The  Payroll  Summary'*  in 
a  later  chapter.)  If  this  method  is  used  throughout  the 
schedule  and  the  book  is  prepared  by  some  one  who  has  a 
knowledge  of  the  results  desired  to  be  obtained,  the  com- 
pilation of  daily  cost  sheets  or  payroll  summaries  will  be 
a  comparatively  easy  matter.    This  is  shown  in  Form  17. 


Form  17. — Time  book. 


In  many  organizations  since  the  time  book  is  for  the 
major  portion  of  the  day  in  the  possession  of  the  mine 
foreman,  a  duplicate  time  book,  very  much  larger  in  size 
and  giving  more  room  for  compilation,  is  kept  for  con- 
stant reference  in  the  mine  office.'  Where  mine  auditors 
are  employed,  the  mine  foreman's  book  is  first  checked 
against  the  office  book  to  determine  the  accuracy  of  the 
latter  and  the  totals  from  the  office  book  are  carried  to 
the  payroll.  In  order  that  the  payroll  record  be  kept  up 
to  date  it  is  necessary  that  the  mine  foreman  turn  his 


THE  DAY  LABOR  RECORD  65 

time  records  into  the  office  daily.  This  is  particularly 
necessary  in  the  case  where  stores  are  operated  by  the 
mining  company  and  the  miners  are  allowed  to  draw 
against  their  credits. 

In  the  posting  of  this  daily  time  book  in  the  office  it  will 
be  found  a  convenience  and  it  will  avoid  error,  if  an 
entry  is  made  in  the  space  assigned  for  each  day,  indi- 
cating by  zero  when  no  labor  is  performed.  If  at  the 
same  time  a  similar  mark  in  ink  is  made  on  the  book  of 
the  timekeeper,  so  that  no  subsequent  entries  may  be 
made  without  the  knowledge  of  the  payroll  clerk,  such  an 
ink  mark,  under  the  pencil  figures  of  the  timekeeper,  will 
generally  show  that  an  item  has  later  been  added. 

Before  turning  in  his  time  book  at  the  close  of  each 
pay  period  the  timekeeper  should  sign  it  on  the  last  page 
used.  The  superintendent  should  examine  the  time  book 
in  detail  and  also  sign  it  to  indicate  approval. 

Some  concerns  have  found  it  convenient  to  have  a  daily 
time  sheet  prepared  and  turned  into  the  office  each  day 
by  the  timekeeper.  Most  operators  consider  the  daily 
preparation  of  such  a  sheet  wasteful  of  time  and  it  is 
certainly  not  conducive  to  ease  or  accuracy  in  checking 
on  the  part  of  the  traveling  auditor  or  mine  accountant. 


CHAPTER  IV 
YARDAGE  AND  DEAD  WORK 

In  addition  to  the  tipple  sheet  which  brings  to  the  pay- 
roll clerk  the  report  of  the  mining  of  the  coal  and  the 
time  book  which  brings  into  his  hands  the  earnings  of  the 
day  men,  it  is  essential  that  he  have  also  from  the  hands 
of  the  mine  foreman  a  report  of  '^Yardage  and  Dead 
Work/' 

''Dead  Work''  is  an  item  which  is  imposed  very  largely 
by  physical  conditions  and  its  general  acceptance  in- 
cludes such  things  as  yardage,  break  thronghs,  room  necks 
and  various  allowances  for  working  in  wet  places,  etc. 
The  allowance  for  ''Yardage"  is  in  addition  to  the  regu- 
lar tonnage  rate  because  of  the  fact  that  miners  working 
in  narrow  places  are  unable  to  produce  as  much  tonnage 
and  therefore  earn  less  money  than  those  working  in 
rooms  or  wide  places.  It  is,  in  effect,  an  allowance  to  in- 
crease earnings. 

Additionally,  it  is  frequently  necessary  in  the  entries  to 
take  down  the  roof  or  to  rip  up  bottom  to  gain  height  for 
travel  ways,  haulage  roads,  etc.  This  narrow-work 
handicap  in  mine  earnings  is  recognized  in  the  making  of 
the  wage  scale  and  is  properly  compensated  for  by  an 
allowance  to  the  miner  in  addition  to  his  tonnage  credit. 
In  addition  to  the  items  enumerated  such  things  as  the 
dumping  and  storing  of  gob,  cleaning  up  falls  and  re- 
timbering  after  them,  handling  squeezes  and  mine-tires 
and  all  other  work  imposed  by  adverse  physical  condi- 
tions should  be  charged  to  this  account,  which  is,  in  short, 
"dead"  work  which  does  not  primarily  produce  nor  fur- 
ther the  production  of  additional  tonnage. 

It  is,  of  course,  understood  that  in  the  development  of 

66 


YARDAGE  AND  DEAD  WORK 


67 


the  mine  the  driving  of  the  entries,  break  throughs,  etc., 
necessary  to  the  development,  that  the  projected  tonnage 
capacity  may  be  reached,  shall  be  capitalized,  but  after 
that  point  is  reached  all  work  of  this  nature  is  simply  ex- 
pense. The  ruling  of  the  Federal  Trade  Commission  in 
its  1918  Instructions  for  the  Compiling  of  Coal  Costs, 
providing  that  all  rock  tunnels,  etc.,  more  than  fifty  feet 
in  length  in  an  operating  mine  shall  be  capitalized  is,  in 
the  opinion  of  most  accountants  and  engineers,  unreason- 
able and  is  one  difficult  of  carrying  out  because  of  the 
fact  that  the  ultimate  length  of  such  tunnels  is  not  always 
known  at  the  time  when  work  is  begun  upon  them.    They 


Mine  Foreman's  Report  of  Yardage  and  Dead  Work 

Mln.                      P«yEndin, 

LOCAlfoN 

T^^ 

R.I. 

YARDAGE 

B 

TK.I 

COAL 

SLATE 

4- 

^ 

'te' 

tin 

& 

1... 

tB 

Ub 

W>l« 

, 

-^ 

" 

1 

TMd. 

1 

1 

Supt.                       .' Min*  Fonnun 

Form  18. — Foreman's  yard  report  blank. 

add  nothing  to  the  value  of  the  plant,  produce  no  revenue 
coal  and  the  cost  of  this  advance  work  where  the  mine  is 
already  in  operation,  is  properly  a  portion  of  the  current 
operating  expense. 

There  is  reproduced  in  Form  18  a  condensed  form  to 
be  filled  out  by  the  mine  foreman  at  the  close  of  each  pay 
period  showing  the  information  necessary  to  be  conveyed 
to  the  payroll  clerk  to  properly  authenticate  credits  to 
employees  for  yardage  and  dead  work. 

Under  most  wage  scales  different  rates  are  provided 
for  pick  and  machine  work,  the  allowances  for  yardage 
being  divided  in  the  case  of  machine  mining  between  the 
cutter  and  the  loader,  while  in  the  case  of  the  pick  miner 
the  credit  is,  of  course,  not  divided. 


68  BITUMINOUS  COAL  MINE  ACCOUNTING 

It  is  important  that  the  total  yardage,  whether  entry, 
hreak  through  or  room  necks,  paid  to  the  loaders,  be 
checked  against  the  yardage  of  the  same  classification 
paid  to  the  cutters,  since  one  class  of  labor  cannot  ad- 
vance beyond  the  other  where  both  are  paid  on  tonnage. 
To  illustrate,  if  loaders  are  paid  for  50  yards  aggregate 
advance,  the  cutters  may  not  have  an  allowance  in  excess 
of  that.  The  superintendent,  payroll  clerk  and  payroll 
auditors,  in  the  examination  of  such  yardage  and  dead 
work  reports,  should  see  to  it  in  their  examination  that 
this  yardage  check  is  maintained. 

The  form  provides  a  column  under  '' Remarks, '*  in 
which  should  be  explained  any  unusual  allowances.  Pro- 
vision is  also  made  for  the  reporting  of  the  thickness  of 
coal  and  slate  to  be  used  in  the  instances  in  which  an  al- 
lowance on  account  of  thin  coal  is  made  or  where  slate 
is  to  be  taken  down  to  gain  height  for  working. 

These  yardage  allowances  are  subject  to  an  additional 
check  by  way  of  safeguard.  Almost  every  mine  has  a 
survey  by  mining  engineers,  quarterly  or  more  fre- 
quently. If  the  engineers  be  instructed  to  give  a  report 
of  advance  work,  particularizing  as  to  the  number  of  feet 
advanced  in  each  entry  or  break  through  and  the  numbers 
of  the  rooms  turned  from  various  entries,  the  mine  fore- 
man's semi-monthly  report  can  readily  be  checked 
against  the  record  and  occasional  duplicate  payments 
may  be  caught.  A  good  way  to  prevent  such  duplications 
is  to  sketch  in  on  the  engineer's  projections  semi-monthly 
the  development  reported  by  the  mine  foreman. 

To  sum  up,  the  yardage  report  should  cover  all  items  to 
the  credit  of  the  employee  for  work  performed  not  com- 
pensated for  either  by  tonnage  or  by  a  rate  per  day  or  per 
hour.  A  properly  ruled  payroll  sheet  will  permit  the 
totals  of  the  mine  foreman's  report  to  be  readily  checked 
to  the  payroll. 

The  Payroll. — The  payroll  clerk,  having  now  in  his 
possession  a  report  from  the  weighmaster  showing  the 


YARDAGE  AND  DEAD  WORK  69 

coal  produced  daily  throughout  the  pay  period ;  from  the 
mine  foreman  or  other  timekeepers  a  record  of  the  labor 
performed  by  day  men,  and  from  the  mine  foreman  a 
record  of  the  yardage  and  deadwork  to  the  credit  of  such 
miners  as  performed  any  such  work,  is  in  position  to 
make  his  payroll  and  daily  cost  sheets. 

An  adequate  payroll  must  provide  in  compact  form 
necessary  spaces  to  provide  for  the  registration  of  the 
name  of  the  employee,  his  check  number,  daily  credits  for 
mining  and  labor  of  any  nature,  and  for  the  accumulation 
of  these  daily  credits  semi-monthly.  It  must  further 
provide  a  record  for  the  various  transactions  usually 
made  covering  merchandise,  cash,  rent,  coal  and  hauling, 
smithing,  charges  for  workmen's  compensation  when  the 
laws  so  provide  and  for  many  miscellaneous  charges  for 
such  things  as  may  be  furnished  the  employee  by  the  com- 
pany for  his  comfort  and  convenience.  While  overdrafts 
on  an  employee's  account  are  always  to  be  discouraged, 
in  the  nature  of  things,  they  will  at  times  occur,  and  the 
form  should  also  provide  for  a  debit  of  that  account. 

Since  it  is  the  custom  in  most  districts  where  stores 
are  operated  by  the  company,  or  where,  through  arrange- 
ments with  other  stores,  orders  are  given  on  them  to 
advance  credit  at  the  beginning  of  a  pay  period  equal  to 
the  amount  standing  to  the  credit  of  the  employee  at  the 
close  of  the  preceding  pay,  it  has  been  found  by  many 
operators  a  convenience  to  have  the  amount  standing  to 
the  credit  of  the  employee  carried  forward  to  the  suc- 
ceeding payroll  where  it  is  merely  a  memorandum  and 
does  not,  of  course,  enter  into  the  cross  addition  of  the 
sheet. 

As  has  been  indicated  heretofore,  because  of  the  dif- 
ferent classes  of  work  performed  by  the  same  man  within 
a  pay  period,  for  convenience  in  keeping  the  time  record 
as  well  as  because  of  the  necessity  for  arranging  a  sepa- 
ration between  pick  mined  and  machine  mined  coal,  it 
may  be  necessary  to  carry  an  employee's  credits  upon  the 


70  BITUMINOUS  COAL  MINE  ACCOUNTING 

payroll  in  more  than  one  place.  At  the  close  of  the  pay 
period,  however,  these  credits  should  be  transferred  to  a 
single  number  in  order  to  bring  together  the  total  of  each 
employee's  earnings  and  that  deductions  for  items  due 
the  employer  may  be  made.  For  this  purpose  a  column 
should  be  provided  for  such  a  transfer.  It  is,  of  course, 
apparent  that  the  debits  and  credits  in  these  transfer 
columns  will  balance.  A  reproduction  of  a  payroll  sheet 
that  can  be  used  to  considerable  satisfaction  is  repro- 
duced. It  is  ruled  on  both  sides,  20%  x  18  in.,  and  should 
be  made  in  loose-leaf  form.  When  placed  in  the  binder, 
open,  a  complete  record  of  the  earnings  and  deductions 
of  each  employee  is  readily  accessible. 

The  daily  totals  of  the  coal  columns  may  be  checked 
against  the  daily  totals  of  the  analysis  on  the  tipple  sheet 
and  the  total  for  the  pay  period  against  the  total  produc- 
tion column  on  the  coal-proof.  The  total  amount  earned 
by  miners  can  be  proved  within  a  few  cents  by  multiply- 
ing the  total  tons  produced  by  the  proper  mining  rate  and 
checking  the  result  against  the  aggregate  amounts  to  the 
credit  of  miners  as  ascertained  in  detail,  and  indicated 
by  the  total  ^  ^  coal '  *  column  on  the  payroll. 

The  day  labor  column  can  be  checked  against  the  time 
book.  The  yardage  can  be  proved  by  the  totals  of  the 
yardage  sheet. 

Amounts  held  out  of  employees'  envelopes  to  protect 
overdrafts  should  be  reported  on  the  cash  book.  If  a 
multiple  column  cash  book  is  kept,  the  *^cash"  column  of 
the  payroll  may  be  checked  against  the  ^^ payroll"  column 
on  the  cash  book.  It  will  readily  be  seen  that  every  item 
here  is  subject  to  quick  and  easy  verification  by  the  pay- 
roll auditor. 

On  the  debit  side  columns  are  provided  for  charges 
against  the  miner  for  store  checks  or  ^^ scrip"  issued 
daily,  the  aggregate  of  these  being  shown  in  the  merchan- 
dise column.  This  daily  '* scrip"  issue  is  readily  checked 
against  the  stubs  of  the  checks  torn  from  the  books,  and 


YARDAGE  AND  DEAD  WORK 


71 


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72  BITUMINOUS  COAL  MINE  ACCOUNTING 

the  semi-monthly  total  is  subject  to  quick  audit  by  multi- 
plying the  difference  between  the  beginning  and  ending 
number  of  each  denomination  of  ^^ scrip,"  which  check 
should  always  be  obtained  by  those  assigned  to  the  pay- 
roll audit. 

The  other  items  of  cash,  rent,  safety  lamp  charges,  etc., 
need  no  explanation  but  are  the  ordinary  deductions  com- 
mon in  almost  every  mine  office.  In  this  same  class 
should  also  be  provided  a  column  for  deductions  on  ac- 
count of  the  check-weighman  in  the  districts  in  which  the 
wage  contract  provides  for  such  a  person. 

The  form  it  will  be  noticed,  also  provides,  in  addition 
to  a  column  showing  the  balance  due  the  employees,  a 
separate  column  showing  the  amount  overdrawn,  if  any. 

If  the  dates  as  shown  on  the  left  of  the  top  of  the  sheet 
are  also  reprinted  at  the  bottom,  below  the  total  line  it 
will  be  found  very  convenient  in  following  through  the 
columns  and  will  frequently  avoid  error  in  posting  coal, 
or  the  time  credit,  reduced  to  money,  to  the  wrong  col- 
umn. It  will  also  be  found  a  convenience  to  carry  a 
check  number  at  either  side  of  the  payroll  for  the  same 
reason. 

When  an  office  time  book  is  kept  it  will  be  found  un- 
necessary to  post  to  the  payroll  in  detail  the  earnings  of 
day  men,  reference  to  the  office  time  book  itself  giving 
the  amount  to  their  credit,  but  many  concerns  prefer  to 
have  the  payroll  show  the  full  detail,  or  at  least  the  daily 
amount  standing  to  the  credit  of  the  day  men. 

Transfer  of  Accounts  to  Other  Mines. — ^It  frequently 
happens  that  employees  may  reside  in  houses  belonging 
to  one  mine  and  work  at  another,  or  that  their  dealings 
with  the  merchandise  department  may  be  at  two  or  more 
stores.  They  may  leave  one  mine  because  of  lack  of  em- 
ployment and  go  to  another  of  the  same  company.  Un- 
der any  of  these  conditions,  that  their  accounts  standing 
on  the  payroll  may  be  collected,  it  is  desirable  that 
charges  be  transferred  to  the  payroll  over  which  the  col- 


YARDAGE  AND  DEAD  WORK 


73 


lection  will  be  made,  and  the  originating  office  be  relieved. 
Columns  have  been  provided  on  the  payroll  form  for 
these  transfers  and  the  transfers  between  payroll  num- 


SeM|.MONTHI.Y  TRANSFER  OF  ACCOUNTS 


MKtPT.   OH   CUERK. 

_ W.  VA. 


ON  VOUIt... 


MINK    PAV    noia.    KNDINO 


M.XASK  COtUeCT  THE  ITEMS  L.ISTKO  BKUOW  AND 
MINK.  WHKN  KNTRV  HAS  BEEN  MAOK  ON  YOUR  PAY  I 
•AMK  TO  ACCOUNTING  OEPARTMENT. 


)IT  SAMK  TO . 

.  OKTACH  RKCKIPT. 


•ION  AND  RKTURN 


YOURS    TRUUY. 


^ _. _ W.  VA. 

DEAR   SIR:- 

WE  BEG  TO  ADVISE  THAT  THE  ITEMS  ABOVE  HAVE 


MINE   PAY   ROUU   MONTH    ENDING. 
YOURS  TRUL.Y. 


ENTERED  ON 

„.l©1.._. 


Form  20. — Transfer-of-account  blank  form.     The  lower  part  is 
detachable. 


bers,  where   an  employee  is  working  in  two  or  more 
classes  of  labor. 

It  is  important  that  one  payroll  be  not  relieved  of  these 
accounts  until  the  items  are  taken  up  on  the  payroll  to 
which  transferred.  For  that  purpose  the  form  illus- 
trated, Form  20,  entitled.  Semi-monthly  Transfer  of  Ac- 


74  BITUMINOUS  COAL  MINE  ACCOUNTING 

counts,  will  be  found  useful.  It  should  be  made  in  tripli- 
cate, the  original  copy  going  to  the  office  to  make  the  col- 
lection, a  duplicate  to  the  auditor,  and  the  triplicate  copy 
should  remain  at  the  office  issuing  it. 

When  this  transfer  is  accepted  the  detachable  portion 
of  the  form  should  be  torn  off  and  sent  to  the  auditor  as 
his  notice  that  the  transaction  has  been  completed. 

The  Payroll  Summary. — After  the  payroll  has  been 
completed,  the  proper  deductions  made  and  the  net  credits 
to  the  miner  obtained,  it  is  necessary  that  an  abstract  or 
summary  of  the  details  of  the  labor  charges  be  made  in 
order  that  the  accountant  may  have  the  data  necessary 
to  be  incorporated  in  the  monthly  cost  sheets,  and  that 
the  management  may  have  something  with  which  to  study 
these  costs  in  detail,  if  so  desired.  It  is  always  desirable 
that  the  payroll  itself,  containing  as  it  does  the  intimate 
details  of  miners'  earnings  and  the  deductions  necessary 
to  be  made  from  them  to  bring  them  to  a  cost  basis,  be 
retained  in  the  payroll  office  for  reference. 

Form  23  will  bring  labor  details  together  concisely. 
This  form  follows  in  exact  order  the  divisions  recom- 
mended by  the  Cost  Accounting  Committee  of  the  Na- 
tional Coal  Association.  The  data  required  with  respect 
to  mining  will  be  obtained  from  the  ^'CoaP'  column  of 
the  payroll  and  will  be  proved  against  the  *^pick''  and 
^ ^machine''  items  on  the  coal  proof.  The  details  of  the 
*'day  labor''  will  be  found  in  the  same  sequence  on  the 
time  book  and  will  be  checked  against  the  *^Day  Labor" 
column  on  the  time  book.  Where  the  time  book  is  prop- 
erly kept,  abstracting  the  amounts  to  the  payroll  sum- 
mary will  be  a  very  easy  matter.  The  details  of  the 
'^dead  work"  will  be  found  on  the  mine  foreman's  report 
of  yardage  and  dead  work  and  will  check  against  the 
** Yardage"  column  on  the  payroll. 

It  will  be  understood,  of  course,  that  in  addition  to  the 
items  entering  directly  into  the  cost  of  coal,  for  which 
the  detailed  analysis  sheet  is  illustrated,  there  will  be 


YARDAGE  AND  DEAD  WORK 


75 


other  items  such  as  dwelling  repairs,  the  cost  of  labor 
performed  on  incomplete  plant,  etc.,  which  will  also  need 
to  be  provided  for  on  the  payroll  summary.  These  items 
and  others  necessary  to  balance  the  payroll  are  shown  in 
the  following  tabulation,  Form  21. 


CL-ASSIFICATION               1        AMOUNT 
OF  LABOR                        n           (DETAIl.) 

y 

A 

WIOUN 
TALe    o 
VISION 

r 

2_ 

Carpenters 
Painters 
Sanitary  Work 
Cleaning  up 

Total  liwellin;  Repaint 

Overdrawn  Accounts 
Petty  Cash 
Pay  Roll  Clerk 
Merchandise  Salaries 
Merchandise— Teamster 
Mdse.  Prop'n  of  Scrip  Qerk 
Clearance 

Refund        Merchandise 
Rent 
Lights 

Insurance    (List  Names) 

Transportation    (List  Names) 
Propwood  -Itemize 

Total  Pay  Roll 

CREDIT 

AMOUNT 

Mdse.                       Store 
Mdse.                       Store 
Mdse.                      Store 

Overdrawn  Last  Pay 

Cash 

Rent 

Rent  (Advance) 

Electric  Lights 

Coal 

Hauling 

Smithing 

Hospital 

Workmen's  Compensatioi 

Clearance 

Brass  Checks 

Water  Rent 

Safety  Lamp 

Transportation  (LUt  Names) 

Total  Uednctions 

Amonnt  Required  to  Pa 

TOTAL  PAY  ROLL 

Form  21. — Some  of  the  payroll  accounts.    Form    22. — Credit   accounts 

against  payroll. 

The  payroll  summary  should  also  contain  an  additional 
column,  or  a  supplementary  sheet  be  provided  which  will 
permit  the  report  to  the  accountant  of  the  deductions  for 
merchandise,  cash  advances,  rent,  charges  for  safety 
lamps,  coal  and  hauling,  smithing,  workmen's  compensa- 
tion fund,  payments  for  check-weighman,  etc.,  etc.,  the 
total  amount  of  the  payroll  chargeable  to  operation,  other 


BITUMINOUS  COAL  MINE  ACCOUNTING 


YARDAGE  AND  DEAD  WORK 


77 


expenses  and  capital  items  being  balanced  by  the  above 
mentioned  deductions  plus  the  amount  required  to  pay. 
A  tabulation  of  the  items  generally  deducted  is  found  in 
Form  22. 


Ko. 


.19... 


IN    ACCOUNT   WITH 

NATIONAL  COAL   CO 


For  month  of. 


CR. 

Bv Cwt.    at 

DR. 

To  Store 

By Cwt.    nt 

^ 

To  Overdrawn  Last  Month... 
To  Cash 

By Cwt.    nt 

By Hours  at 

To  llent  <fc  EIcc    Light* 

To  Coal 

By Hours  at 

To  Hauling 

By Yards  at 

1 

To  Smithing 

To  Insurance 



Bv».__ YarJs  at 

!    ■ 

To  Workmen's  Com.  Fund 
To  Doctor 

1 



1 

By Cosh 

To  Safety  Lamp 

To  Board  or  Labor 

1 

Total 

Total 

By  Balance  Due  Workman.. 

! 





Cut  This  Receipt  OIT  and  Present  at  the  Pay  Window. 


No. 


RcceivcD  or  NATIONAL  COAL   CO 


* in  full  of  all  claims  to 

Witncm  at  Slsnini;:  Sicn  Here. 


DOLLARS, 
19 


Form    24. — Payroll    Statement.    The    receipt    is    per- 
forated and  may  be  torn  off. 

The  payroll  summary  should  be  authenticated  by  the 
payroll  clerk  and  the  superintendent,  the  certificates  stat- 
ing on  behalf  of  the  superintendent  that  he  certifies  to 
the  correctness  of  the  hours  of  labor  performed,  tons  of 
coal  mined,  yards  of  entry,  etc.,  driven,  the  rates  of  pay. 


78 


BITUMINOUS  COAL  MINE  ACCOUNTING 


MINER'S  EARNINGS  AND  EMPLOYMENT  RECORD 
Name 

Address 

Mf'ripfl 

Nnfinnalil 

.y  \g 

X*           ForiTi    inTfi 

Si  crnorl 

Miners  Certificate  No. 

>ns' 

Previously  e 
Left  employ] 

nnployfy^ 

ment 

Pay 
Period 

Days 
Wor- 
ked 

Occupation 

Tonnage 
Mining 
Am't 

Yardage 
and 
Dead 
Work 

Day  Labor 

Gross 
Earnings 

Occupational    1 
Deductions     | 

flate 

Am't 

.9 

I 

1 

1} 

Dec. 2  Hf 

Jan.l  Hf 

Jan.2  Hf 

Feb.l  Hf 

Feb.2  Hf 

Mar.lHf 

Mar.  2  Hf 

Apr.l  Hf 

Apr.2  Hf 

May  1  Hf 

May  2  Hf 

June  1  Hf 

June  2  Hf 

July  I  Hf 

July  2  Hf 

Aug.l  Hf 

Aug.2  Hf 

Sept.l  Hf 

8ept.2  Hf 

Oct.l  Hf 

Oct.2  Hf 

Nov.l  Hf 

Nov.2  Hf 

Dec.l  Hf 

Dec.2  Hf 

Totals 

FoEM  25. — Record  of  employee's  earnings. 


YARDAGE  AND  DEAD  WORK  79 

and  that  he  has  personally  examined  the  payroll  in  detail. 

It  will  be  found  a  great  convenience  if  these  payroll 
summaries  be  made  up  in  manifold  books,  a  carbon  copy 
being  retained  at  the  mine  and  copies  furnished  the  ac- 
countant for  incorporation  in  the  cost  sheet  and  to  the 
mine  management  for  study  of  the  details  of  labor  cost. 

The  payroll  being  completed,  some  periodic  statement 
of  earnings  of  each  individual  employee  is  necessary,  that 
he  may  have  knowledge  of  the  standing  of  his  account 
both  for  services  performed  and  for  occupational  deduc- 
tions, rent,  store  account,  etc.  This  form  is  usually  com- 
bined with  a  receipt,  and  niay  be  in  form  something  on 
the  order  of  Form  24. 

Some  prefer  the  issuing  of  a  pay  envelope  somewhat 
larger  than  the  ordinary,  on  which  a  duplicate  of  the  pay 
statement  appears. 

The  payroll  receipts  should  be  arranged  numerically 
after  pay  day  to  expedite  the  audit  of  the  accounts  by  the 
payroll  auditor. 

Record  of  Earnings  of  Employees. — It  will  be  found 
convenient  in  the  compilation  of  reports  to  the  federal 
and  state  government  departments  to  have  a  record  kept 
currently  showing  the  earnings  of  miners  and  other  em- 
ployees. Such  a  record  will  be  valuable  in  the  prepara- 
tion of  facts  for  use  in  wage  negotiations.  Lack  of  such 
data  cannot  fail  to  put  those  negotiating  a  wage  scale  at 
a  disadvantage.  A  simple  form  of  such  report  is  illus- 
trated in  Form  25. 


CHAPTER  V 
DAILY  COST  SHEETS 

Since  the  cost  of  operating  a  coal  mine  cannot  be  ob- 
tained completely  for  a  given  month  until  usually  15  or 
20  days  after  the  month  has  closed,  because  of  the  diffi- 
culty of  securing  railroad  weights  to  obtain  the  tonnage, 
which  is  the  basis  of  cost,  it  is  desirable,  if  not  indeed 
absolutely  necessary,  that  the  mine  management  be  fur- 
nished from  day  to  day  with  a  report  which  will  show 
at  least  the  labor  cost  in  detail.  By  having  such  a  daily 
report  of  labor,  the  manager  has,  so  to  speak,  his  hand 
upon  the  pulse  of  operation. 

The  daily  report  should  follow  the  ordinary  and  natu- 
ral method  of  operation  of  the  mine  and  should,  in  all 
respects,  contain  the  same  day  labor  items  in  the  same 
sequence  as  on  the  payroll  summary,  which  was  dealt 
with  in  the  preceding  chapter.  The  ruling  of  the  form 
for  the  daily  cost  sheet  should  provide  for  data  as  to 
number  of  men  of  each  class  employed,  the  hours  worked 
by  each,  the  rates  per  day,  the  amount  for  each  occupa- 
tion and  a  short  extension  to  show  the  total  cost  by  sub- 
divisions to  expedite  comparisons.  The  classification  of 
labor  is  the  same  as  that  shown  upon  the  payroll  sum- 
mary. The  arrangement  of  the  headings  of  such  a  daily 
cost  sheet  is  as  follows : 


OCCUPATION 


Id 

CO    OJ 


p. 


AMOUNT 
(each  occupation) 


TOTAL 
(Division  Only) 


Form  26. — Headings  of  Daily  Cost  Sheet. 


Many  operators  have  recognized  the  value  of  establish- 


DAILY  COST  SHEETS  81 

ing  a  normal  or  standard  cost  sheet  in  which,  after  study 
of  all  conditions,  there  will  be  incorporated  all  of  the 
labor  necessary  to  produce  the  normal  tonnage  of  the 
mine,  taking  into  consideration  always  in  fixing  the  nor- 
mal tonnage  the  probability  of  partial  car  shortage,  mine 
disability,  etc.  In  other  words,  in  fixing  upon  such  a 
standard  cost  sheet  the  highest  possible  productive  ca- 
pacity, with  no  handicaps,  should  not  necessarily  be  the 
gauge. 

In  such  a  theoretical  or  standard  cost  sheet  will  be 
included  the  number  of  men  of  each  class  of  labor  ordi- 
narily employed,  the  rate  per  day  and  the  aggregate  cost. 
The  total,  divided  by  the  normal  or  standard  number  of 
tons  of  coal  to  be  produced  will  give  a  theoretical  cost 
per  ton  of  production. 

With  such  a  standard  cost  sheet  should  be  compared 
the  daily  cost  sheets  showing  actual  performance  and  the 
variations  from  the  standard  cost  can  be  readily  deter- 
mined and  made  the  subject  of  inquiry  by  the  manage- 
ment. These  daily  cost  sheets  should  also  be  examined 
in  days  in  which  for  any  cause  the  full  number  of  hours 
ordinarily  worked  is  not  operated  by  the  mine,  in  order 
to  see  what  labor,  if  any,  is  retained  beyond  the  number 
of  hours  which  the  tipple  operated.  The  reason  for  re- 
taining such  labor  beyond  the  operating  period  should 
be  made  the  subject  of  investigation. 

Every  manager  recognizes  the  fact  that  some  classes  of 
labor  can  be  more  advantageously  employed  when  the 
mine  is  not  in  full  operation  and  this  class  is,  to  the  ex- 
perienced manager,  of  course,  immediately  apparent,  but 
these  daily  cost  sheets  will  at  times  bring  to  him  cases 
in  which  unnecessary  labor  is  retained,  due  either  to  lack 
of  judgment  on  the  part  of  the  foreman  or  to  favoritism. 

The  daily  cost  sheet,  for  convenience,  should  carry  the 
necessary  details  to  show  not  only  the  result  of  the  cur- 
rent day's  operation  in  total  and  in  such  subdivisions  as 
the  mine  management  may  feel  necessary,  but  should 


82 


BITUMINOUS  COAL  MINE  ACCOUNTING 


show  also  the  previous  period  and  the  cumulative  figures 
to  date,  something  in  the  order  shown  in  Form  27. 


PRODUCTION  STATISTICS 
Hours  Worked  Plus  Lost  Time  Muit  Equal  Total  Poieible  Working  Time 

w"o?.^ 

LOST  TIME.  Give  detail  under  Remark.. 

PICK  COAL 

MACHINE  COAL 

TOTAL 

TOTAL  LABOR  COSTS 

No.  Cor. 

No.  Order. 

AecidenU 

8i^. 

Miner. 

Ton. 

srn 

Minen 

Tou 

_S^ 

Me. 

Ton. 

^ 

*— ' 

t"^ 

■■ 

ToD.le... 

E.tin,.t«|- 







^ 





niff<-r-nrr 



Give  Detul  of  AccidenU,  Delay.,  Etc.  . 


Form  27. — Daily  Cost  Sheet.     Summary  for  recording  hours  of  labor  and 

labor  cost. 

Some  operators  have  found  it  desirable  to  establish  an 
idle  day  cost,  incorporating  in  the  standard  or  theoreti- 


Bou  Driver'*  DaOy  Rqiort 


Mi^M 

101 

Ne. 

L.CMI.. 

Of 

Mnle 

N..b. 

C» 
CI 
FUlUed 

C« 

Ta.1 
Ubor 
T«l., 

How 

REMARKS 
(Ci«ec.o«.llo.1>ii») 

1 

2 

10 

11 

12 

13 

14 

15 

TOTAL   TODAY 

Form  28. — Boss  driver's  daily  report  blank. 

cal  idle  day  cost  sheet  only  such  labor  as  it  is  absolutely 
necessary  to  retain  on  Sundays  or  idle  days  in  order  to 


DAILY  COST  SHEETS 


83 


ventilate  the  mine,  keep  the  pumps  running  and  for  the 
time  of  watchmen  and  other  such  labor.  Any  variations 
from  standard  in  this  respect  must  also  be  the  subject  of 
complete  investigation. 

Supplementing  the  daily  cost  sheet,  that  the  mine  fore- 
man and  superintendent  may  have  information  as  to  the 
daily  performance  of  locomotives  and  drivers  it  may  at 
times  be  desirable  to  have  a  report  from  the  various  sec- 
tions of  the  mine  as  to  pertinent  phases  of  transporta- 


STABUE    BOSSES'    DAILV    REPORT 


MINE 



_  I01 

HAY            j            OATS 

CORN 

1       ALFALFA 

SALT 

•B^ginnmg  o(  day 

j; 

Pound*  dtlivtred  to  Slorf 

i| 

Pounds  fed  today 

1 

Pounds  detivfrfd  lo  ottKr  Minn 

Pounds  on  band  at 
lh«  dost  o(  day 

Pound,  r^^  today 

Toul  pound!  to  tx 

; 

Number  mulct  fed. 


.Number  mulct  working. 


.Number  mole*  received  today. 


Did  mulct  have  tufficient 


How  many  diaabled  muletio  ttable_ 


FOBM  29. — Stable  bosses'  daily  report  blank. 

tion.    Such  a  report,  Form  28,  designated  Boss  Driver's 
Report,  is  herewith  shown. 

The  cost  of  care  and  feeding  of  the  livestock  is  an  item 
of  much  importance,  and  one  which  demands  the  careful 
attention  of  the  local  management.  Unless  carefully 
supervised,  the  animals  may  be  underfed,  but  more  likely 
is  feed  wasted  because  of  improper  handling  or  careless- 
ness. A  short  form  of  report  of  feed  used  and  inventory 
of  quantities  on  hand  daily,  as  sho^vn  in  Form  29,  will 
bring  the  facts  to  the  attention  of  the  superintendent  and 
form  the  basis  of  the  charge  to  the  monthly  cost  for  the 
value  of  such  supplies  consumed. 


CHAPTER  VI 
ACCOUNTING  FOR  SUPPLIES 

In  importance  second  only  to  the  proper  accounting 
for  the  labor  in  connection  with  costs  in  coal  mines,  is 
the  accounting  for  supplies.  In  fact,  it  is  sometimes  even 
more  difficult  to  draw  the  proper  distinction  between  capi- 
tal investment  and  expenses  in  supplies  than  it  is  in  the 
matter  of  labor. 

The  proper  distinction  between  capital  and  operating 
expenditure  is  set  out  in  the  ^*  Report  and  Suggestions 
of  Committee  on  Standard  System  of  Accounting  and 
Analysis  of  Cost  Production,''  of  the  National  Coal  Asso- 
ciation, on  page  8,  as  follows : 

"The  drawing  of  distinctions  between  capital  and  operating  expendi- 
tures, in  the  accounting  involved  in  permanent  enterprises,  is  a  favorite 
field  for  discussion  among  accountants,  but  in  the  case  of  coal  mining 
or  other  wasting  enterprises,  experience  teaches  that  the  field  for  dis- 
cussion, if  indeed  there  be  any,  is  extremely  limited. 

"After  a  coal  mine  has  been  developed  and  equipped  to  its  contem- 
plated or  possible  capacity,  it  is  a  constant  consumer  of  material  and 
supplies  and  equipment,  which,  though  nominally  of  a  durable  nature, 
are  subject  to  destructive  wear  and  tear,  by  reason  of  the  uses  to  which 
they  are  put,  and  all  these  appliances  must  be  kept  in  repair  to  do  their 
work  or  the  output  cannot  be  maintained. 

"Mules  and  pit  cars  are  constantly  worn  out  and  have  to  be  replaced 
and  as  the  working  faces  advance  with  the  exhaustion  of  the  coal,  the 
length  of  haul,  the  consequent  time  of  circulation  of  pit  cars  between 
the  working  face  and  dump  increases,  more  motors,  mules  and  pit  cars 
have  to  be  supplied  to  maintain  the  output  and  the  more  motors,  mules 
and  pit  cars  in  the  mine,  the  greater  expense  for  replacements  and 
repairs. 

"Also,  with  the  advance  of  workings,  more  rails  have  to  be  laid  and 
more  copper  wire  or  other  conductors  put  up  to  carry  power  to  the 
working  faces  to  maintain  the  output.     They  remain  in  place  until  the 

84 


ACCOUNTING  FOR  SUPPLIES  85 

mine  is  exhausted  and  when  they  are  recovered  have  but  little  net  scrap 
value.    In  fact,  any  net  salvage  is  relatively  very  small. 

"The  fact  that  these  expenses  are  continually  recurrent  and  prac- 
tically a  fixed  factor  in  the  cost  of  production  per  ton  from  year  to 
year,  proves  that  they  constitute  an  operating  rather  than  a  capitalizable 
expense. 

"This  being  so,  it  makes  no  difference  to  taxable  income  whether  they 
are  charged  immediately  to  operating  expense  or  written  off  by  deduc- 
tions representing  depreciation  allowances  which  would  have  to  be  re- 
adjusted and  compounded  from  year  to  year.  As  a  practical  matter,  it 
is  better  to  dispose  of  such  expense  by  direct  charge  to  operating 
expense  rather  than  taken  care  of  by  vexatious  refinements  of  account- 
ing, that  would  be  necessary  if  these  items  be  capitalized  and  'depre- 
ciated.' 

"That  this  proposition  is  now  acceptable  to  the  Department  is  sub- 
stantiated by: 

"Regulations  45 — Revenue  Law  of  1918 

"Art.  222.  Charges  to  capital  and  to  expense  in  the  case  of  mine, — 
In  the  case  of  mining  operations  all  expenditures  for  plant,  equip- 
ment, development,  rent  and  royalty  prior  to  production  and  thereafter 
all  major  items  of  plant  and  equipment,  shall  be  charged  to  capital 
account  for  purposes  of  depletion  and  depreciation.  After  a  mine  has 
been  developed  and  equipped  to  its  normal  and  regular  output  capacity, 
however,  the  cost  of  additional  minor  items  of  equipment  and  plant, 
including  mules,  motors,  mine  cars,  trackage,  cables,  trolley  wire,  fans, 
small  tools,  etc.,  necessary  to  maintain  the  normal  output  because  of 
increased  length  of  haul  or  depth  of  working  consequent  on  the  ex- 
traction of  mineral  and  the  cost  of  replacements  of  these  and  similar 
minor  items  of  worn-out  and  discarded  plant  and  equipment,  may  be 
charged  to  current  expense  of  operations,  unless  the  taxpayer  elects  to 
write  off  such  expenditures  through  charges  for  depreciation." 

Article  222,  of  Regulations  45,  as  first  issued,  which  is 
reproduced  in  the  paragraph  immediately  preceding,  was 
later  altered  by  the  Bureau  of  Internal  Revenue  to  read 
as  follows : 

"Art.  222.  Allowable  Capital  Additions  In  Case  of  Mines. —  (a)  All 
expenditures  for  development,  rent  and  royalty  in  excess  of  receipts 
from  minerals  sold,  shall  be  charged  to  capital  account  recoverable 
through  depletion,  while  the  mine  is  in  the  development  stage.  There- 
after any  development  which  adds  value  to  the  mineral  deposit  beyond 
the  current  year  shall  be  carried  as  a  deferred  charge  and  apportioned 
and  deducted  as  operating  expense  in  the  years  to  which  it  is  ap- 
plicable. 


86  BITUMINOUS  COAL  MINE  ACCOUNTING 

"(b)  All  expenditures  for  plant  and  equipment  shall  be  charged  to 
capital  account  recoverable  through  depreciation,  while  the  mine  is  in 
the  development  stage.  Thereafter  the  cost  of  major  items  of  plant 
and  equipment  shall  be  capitalized  but  the  cost  of  minor  items  of 
equipment  and  plant,  necessary  to  maintain  the  normal  output,  and 
the  cost  of  replacement  may  be  charged  to  current  expense  of  opera- 
tion." 

Members  of  the  Internal  Eevenue  Bureau  staff  have 
stated  that  this  charge  does  not  in  any  way  affect  the  in- 
terpretation by  the  Bureau  of  the  distinctions  between 
capital  and  operating  expenditure.  The  importance  of 
this  division,  which  is  based  on  sound  accounting  prin- 
ciples and  the  equity  of  which  is  recognized  by  the  Treas- 
ury Department,  cannot  be  too  carefully  observed.  It 
naturally  follows  that  anything  which  will  permanently 
and  materially  increase  production  and  decrease  costs 
should  be  capitalized  and  that  all  other  items  of  minor 
importance  should  be  treated  as  items  of  expense.  Any 
other  method  of  handling  is  merely  borrowing  earnings 
from  the  future.  If  a  single  item  is  of  sufficient  value  as 
to  materially  disturb  the  general  cost  level  it  should  be 
spread  over  a  sufficient  period  to  avoid  such  a  disturbance 
through  a  charge  to  deferred  expense. 

It  naturally  follows  that  supplies  used  in  the  operation 
of  a  mine  should  be  charged  to  the  same  general  account 
as  the  labor  of  installing  them. 

Method  of  Accounting  for  Supplies  Used. — Where  at 
all  practicable,  the  proper  method  of  handling  supplies  is 
through  a  supply  house  to  which  all  material  when  pur- 
chased should  be  charged  to  be  delivered  to  the  mine  on 
requisition  of  the  proper  operating  official. 

Practical  difficulties  frequently  make  it  inexpedient, 
even  impossible,  to  actually  provide  a  supply  house.  It 
is  recognized  that  coal  mines  cover  large  areas  and  that 
bulky  supplies,  such  as  mine  rails,  pit  props,  etc.,  are  fre- 
quently delivered  to  a  number  of  places  outside  the  mines 
for  convenience  of  handling  when  needed.    Eegardless  of 


ACCOUNTING  FOR  SUPPLIES 


87 


this  fact,  however,  it  is  possible  to  keep  a  record  of  such 
supplies  as  they  are  taken  into  the  mines,  and  while  not 
directly  under  the  eye  of  the  storekeeper  such  supplies 
can  be  accounted  for  through  the  regular  requisition  form 
just  the  same  as  the  supplies  which  are  taken  from  a 
supply  house. 
Where  a  supply  house  is  maintained,  a  requisition  or 


ORDER  FOR  MIN 
Mine 

E  SUPPLIES 

19 

wins  deaeribed  article*: 

Supply  Clerk. 

Pleaie  cive  b«ar*r  the  folic 

Qu.nl,ty 

Dc«TipUooo<Artide 

For  UM  of                  1      Cott 

-Value 

...,..„..,. 

Signed. 


Form  30. — Order  blank  for  mine  supplies. 

order  for  mine  supplies  should  be  signed  by  the  proper 
official  and  delivered  to  the  storekeeper.  Such  a  requisi- 
tion is  reproduced  in  Form  30. 

This  requisition  should,  preferably,  be  made  in  dupli- 
cate, one  copy  to  be  retained  by  the  storekeeper,  the  other 
copy,  after  having  the  price  and  value  extended,  to  be 
passed  along  to  the  purchasing  agent  or  the  accounting 


DAILY  REPORT  OF  SUPPLIES  USED 

Mine   

The  following  it  a  li«t  of  the  supplies  used  at  this  mine  today. 


MINE    TIMBERS 

This  includes  all  timbers  used  in  Mine,  such  as  ties,  rails,  posts,  caps,  etc. 

Quantity 

Full  DcsCTipUon  of  Article 

Coat                    Amoiut 

Form  31. — Mine  supplies  daily  report  blank. 

officer  for  his  record  and  for  charge  to  the  proper  di- 
vision of  cost. 

Where  there  is  no  storehouse  and  no  general  super- 
vision of  stores  under  the  direct  care  of  storekeeper, 
somewhat  the  same  value  can  be  obtained  through  hav- 
ing a  daily  report  of  supplies  used  which  should  be 
made  by  the  outside  foreman  or  some  one  who  is  en- 


88  BITUMINOUS  COAL  MINE  ACCOUNTING 

trusted  with  that  particular  duty.  This  daily  report 
should  provide  spaces  for  the  reporting  of  supplies  un- 
der the  same  general  headings  as  the  cost  sheet. 

One  section  of  a  suggested  form  to  cover  this  method 
of  handling  is  shown  on  the  preceding  page,  the  mine 
timber  section  being  used  for  illustration  (Form  31). 

Through  this  method  of  handling  the  unit  cost  should 
be  supplied  by  the  purchasing  agent  of  the  company,  the 
extension  completed,  and  at  the  end  of  the  month  a  re- 
capitulation be  made  showing  the  value  of  supplies  used ; 
specifying  which  are  properly  chargeable  to  mine  timber- 
ing, dead  work,  etc.,  and  so  on  throughout  the  schedule. 

Some  operators  prefer  to  charge  to  cost  their  supplies 
at  the  time  of  purchase,  and  through  a  system  of  monthly 
inventories,  credit  the  operating  account  with  the  ma- 
terial not  used.  This  method  of  handling  is,  in  the  opin- 
ion of  a  great  many  operators  and  accountants,  inac- 
curate. Many  supplies  are  of  a  nature  that  they  may 
possibly  be  used  in  one  of  a  half  dozen  classes  of  opera- 
tion. There  is  not  the  opportunity  for  the  same  super- 
vision over  their  use  as  there  is  through  the  system  of 
requisition  on  a  storehouse. 

Taking  the  monthly  inventories  is  expensive.  These 
inventories,  to  be  of  real  value,  should  be  quite  volumi- 
nous, covering  practically  every  item  ordinarily  used  in 
the  operation  of  a  mine. 

Some  operators  have  prepared  inventory  blanks  in 
which  are  listed  only  the  bulky  materials  such  as  mine 
timber,  props,  feed,  steel  rail,  etc.,  which  run  quickly 
into  large  amounts  of  money,  but  it  has  been  found  from 
actual  experience  that  such  an  inventory  covers  in  value 
probably  not  over  50  per  cent  of  the  supplies  actually 
on  hand  at  the  mines  and  there  is  a  difficulty  through  any 
inventory  system  of  crediting  to  the  same  subdivision  of 
cost  to  which  they  were  charged,  the  value  of  supplies 
which  are  of  a  nature  that  they  might  be  used  for  two 
or  more  purposes. 


ACCOUNTING  FOR  SUPPLIES 


89 


For  the  use  of  those  who  prefer  such  a  method  how- 
ever, there  is  here  reproduced  a  form  which  by  rubber 
stamp  impression  on  the  back  of  the  invoice  will  give  the 


PRICE  Correct,  F.O.B.  ITSfi'"' 

Purcbasiag  Agent 

Day 


Material 

Received Mo. 


Quality Quantity- 


Charge , S  " 

To  be  used  as  follows: 


Mining 

$ 

Repaira    to 
Buildings  and 
Permanent 
Structures  .. 

Mine  Office    . 

$ 

Timbering 

Superinfnd'nce 
Engineerinc 

Track  Laying.. 

Drainage 

Dwelling    Re- 

Ventilation 

Capital  Acc't 

Haulage     and 

Perspnal   Acct 
General  Exp... 



Dumping   and 
Tallying   .... 

Railroad    Car 
Loading    and 
YardExpense 

Power  , 



FREIGHT  OR  EXPRESS  fSHIPPER 


.  Receiving  Supt. 
.Master  Mechsnio 
General  Mgr. 


Form  32. — Distribution  of  charges. 

necessary    information,    that    analysis    of    the    supply 
charges  may  be  made. 

It  is  essential,  of  course,  that  all  of  this  information  be 


90  BITUMINOUS  COAL  MINE  ACCOUNTING 

supplied  at  the  mine,  since  nobody  but  the  operating  of- 
ficials on  the  ground  have  definite  knowledge  as  to  the 
purpose  for  which  such  supplies  were  ordered. 

The  accounting  procedure,  in  this  case,  is  extremely 
simple.  After  the  proper  receipt  has  been  acknowledged 
as  provided  by  the  spaces  on  the  form  and  the  proper 
approvals  secured,  the  invoices  themselves  are  vouch- 
ered  and  charges  made  through  the  purchase  register  to 
the  proper  division  of  cost. 

Still  another  class  of  operators  prefer  to  charge  all 
supplies  to  a  single  supply  account  and  to  make  no  at- 
tempt to  allocate  supply  costs  against  the  natural  sub- 
division of  operation.  While  the  cost  and  inconvenience 
of  making  a  proper  subdivision  is  considerable,  yet  it  has 
been  the  experience  of  most  operators  who  have  tried 
both  methods  that  in  the  long  run  there  is  a  very  con- 
siderable financial  saving  through  both  the  supply  house 
method  and  through  having  a  very  definite  knowledge  of 
the  use  to  which  every  article  of  supplies  is  put.  . 


CHAPTER  VII 
POWER  HOUSE  FUEL 

The  coal  produced  at  the  mine  and  burned  under  the 
boilers  for  the  generating  of  power  for  use  in  the  opera- 
tion of  the  mine  is  a  proper  charge  to  operation.  This 
is  the  only  expense  about,  a  coal  mine  which  cannot  be 
charged  directly  to  some  one  subdivision  of  the  opera- 
tion. To  the  cost  of  operation  of  the  power  house  should 
be  charged  the  fuel,  the  wages  of  the  firemen,  ash  haul- 
ers, brick  layers  and  attendants  used  in  the  construction 
and  repair  of  boiler  walls ;  generator  and  compressor  at- 
tendants in  electrical  and  air  installations  and  such  part 
of  the  time  of  the  hoisting  engineer,  electrician  and  other 
mechanics  as  may  be  used  in  the  construction  and  repair 
of  boiler  plants,  electrical  installation  and  other  such 
equipment  in  power  houses.  In  addition  to  this,  where 
water  is  purchased,  the  water  becomes  a  proper  charge 
to  power  plant. 

There  has  been  no  little  discussion  as  to  the  proper  rate 
per  ton  for  use  in  charging  to  operation  the  coal  con- 
sumed under  the  boilers  in  the  generating  of  power. 
Some  operators  prefer  to  charge  this  at  the  cost  of  pro- 
duction as  indicated  by  the  preceding  month's  cost  sheets, 
excluding,  of  course,  selling  expenses.  Some  have  made 
charges  on  the  basis  of  the  commercial  contract  which 
they  may  have  bringing  them  the  lowest  sales  returns, 
based  on  the  idea  that  this  coal  if  not  used  under  the 
boilers  might  have  been  sold  for  at  least  that  rate. 

It  is  a  recognized  principle  that  no  anticipated  profit 
should  enter  into  any  element  of  cost  and  for  that  reason 
when  this  question  was  up  for  discussion  before  a  meet- 
ing of  accountants  of  the  bituminous  coal  industry,  held 

91 


92  BITUMINOUS  COAL  MINE  ACCOUNTING 

some  months  ago,  the  consensus  of  opinion  was  that  coal 
used  for  mine  fuel  should  be  charged  according  to  the 
generally  accepted  method  of  pricing  inventories,  namely, 
at  cost  or  market,  whichever  is  lower.  Because  of  the 
difficulty  of  ascertaining  the  current  cost  at  the  time 
when  the  boiler  fuel  charges  would  need  to  be  made,  it 
probably  would  be  most  advantageous  to  use  either  the 
basis  of  the  preceding  month's  cost,  excluding  selling  ex- 
pense, or  the  cumulative  average  cost  figures  for  the  year 
to  date. 

The  instructions  issued  by  the  Federal  Trade  Commis- 
sion in  connection  with  the  latest  reports  required  from 
coal  operators  reads:  "No  charge  should  be  made  to 
^Generating  Power'  for  coal  used  that  is  produced  at 
the  mine  to  which  the  power  is  supplied."  These  instruc- 
tions marked  a  departure  from  the  plan  and  theory  there- 
tofore followed  by  the  Federal  Trade  Commission.  The 
cost  sheet  issued  by  them  for  the  year  1917  and  which 
was  used  for  the  year  1918,  provided  for  the  inclusion  of 
produced  coal  in  power  house  fuel.  The  instructions  in 
connection  with  the  forms  issued  for  the  year  1918  were 
as  follows: 

"Power-house  Fuel — This  account  shall  include  the  cost  of  fuel  used 
in  connection  with  coal-mining  operations.  If  the  fuel  used  is  coal 
mined  by  the  operator,  it  shall  be  charged  into  this  account  at  the  cost 
per  ton  shown  for  the  preceding  month.  In  determining  the  cost  of 
this  fuel,  selling  expense  shall  be  excluded." 

It  is  the  consensus  of  accounting  opinion  in  the  bitumi- 
nous industry  that  coal  burned  under  the  boilers  is  prop- 
erly a  portion  of  the  cost  and  that  the  divisor  for  coal 
cost  is  the  entire  tonnage  of  coal  produced,  rather  than 
that  sold  as  advocated  by  the  Federal  Trade  Commission. 
Most  operators  have  accumulated  statistics  running  back 
over  a  number  of  years  in  which  boiler  coal  has  been 
included  as  a  portion  of  the  cost  of  production.  Many 
companies   operating  more  than   one  mine  have   some 


POWER  HOUSE  FUEL  93 

mines  where  power  is  generated;  other  mines  where 
power  is  purchased.  Some  plants  operate  through  in- 
dividual power  plants;  other  through  a  central  power 
plant. 

For  the  purpose  of  internal  comparison,  it  is  abso- 
lutely essential  that  the  value  of  coal  consumed  under  the 
boilers  be  treated  as  a  portion  of  cost.  Furthermore,  the 
management  is  frequently  called  upon  to  decide  whether 
or  not  it  is  more  advantageous  to  continue  the  operation 
of  a  steam  plant  or  to  install  electrical  equipment,  to  be 
operated  either  with  generated  power  or  with  power  pur- 
chased and  the  knowledge  of  the  cost  of  generating 
power  with  produced  fuel  is  essential  information  be- 
fore the  advantage  of  one  system  can  be  ascertained  as 
compared  with  the  other. 

In  arriving  at  this  conclusion  there  will  necessarily  be 
taken  into  consideration  the  fact  that  many  mining  leases 
provide  that  fuel  produced  at  a  mine  and  used  under  the 
boilers  may  be  so  used  without  the  payment  of  royalty 
on  the  portion  used,  whereas  if  such  coal  is  diverted  to 
commercial  use  it  is  subject  to  royalty  payments.  The 
loss  of  the  free  use  of  this  coal  sometimes  makes  a  con- 
siderable difference  in  the  operating  cost  and  should  be 
given  consideration  in  the  determination  of  policy.  At 
the  same  time  it  may  also  materially  increase  the  volume 
of  coal  released  for  commercial  sales  and  is,  to  that  ex- 
tent, at  times  a  great  advantage. 

If  outside  power  is  purchased  it  should  be  charged  to 
*' Power."  After  the  total  cost  of  power  has  been  ascer- 
tained, whether  generated  or  purchased,  it  may  be  di- 
vided and  allocated  against  the  various  subdivisions  of 
operation.  ** Mining"  should  be  charged  with  the  power 
used  in  undercutting  by  machines.  To  ^*  Haulage  and 
Hoisting"  should  be  charged  the  cost  of  power  used  by 
the  hoisting  engines  and  haulage  engines  or  locomotives. 
^'Preparation"  should  be  charged  with  the  cost  of  power 
used  in  the  operation  of  shaker  screens,  picking  tables, 


94  BITUMINOUS  GOAL  MINE  ACCOUNTING 

etc.,  ^^Ventilation''  with  the  power  used  in  driving  fans 
and  so  on  throughout  the  schedule. 

Some  operators,  however,  prefer  to  allow  ** Power"  to 
stand  by  itself  as  a  single  item  of  operation.  Where 
in  the  judgment  of  the  management  this  is  advisable 
there  can  be  no  objection  taken  to  it. 


CHAPTER  VIII 
ROYALTIES 

One  of  the  most  troublesome  things  to  account  for  in 
connection  with  the  operation  of  a  coal  mine  is  for  the 
royalties  paid  on  leased  tracts.  Where  a  mine  is  oper- 
ating in  a  single  tract  of  coal  belonging  to  one  lessor 
company,  this  is  very  simple  since  the  entire  tonnage 
produced  will  be  reported.  Where  it  happens,  as  it  fre- 
quently does,  that  coal  is  being  mined  from  a  number  of 
leased  tracts  or  partly  from  leased  tracts  and  partly 
from  fee  holdings,  it  is  necessary  that  great  care  be  taken 
to  insure  the  proper  division  between  the  interested  par- 
ties, and  the  accounting  is  considerably  complicated 
through  the  requirements  of  the  lease  that  distribution 
be  made  among  a  number  of  parties  interested  in  the 
various  leaseholds.  These  lessor  parties  change  from 
time  to  time  because  of  the  sale  of  interests,  or  probably 
more  frequently  because  of  division  among  the  heirs  of 
an  estate. 

If  the  interested  lessors  can  be  brought  to  an  agree- 
ment to  accept  the  proportionate  part  of  the  production 
of  a  mine  based  on  the  full  tonnage  of  recoverable  coal, 
measured  by  the  acreage  of  the  lease  or  in  other  words 
to  pool  their  acreage,  the  accounting  method  is  corre- 
spondingly simple,  it  being  only  necessary  to  ascertain 
with  reasonable  accuracy  the  number  of  acres  of  mine- 
able coal  in  each  tract  and  pay  each  lessor  monthly  for 
the  number  of  tons  produced,  measured  by  the  percen- 
tage which  his  acreage  bears  to  the  total  acreage  of  the 
mine. 

Frequently,  however,  such  an  agreement  cannot  be 
reached  and  it  becomes  necessary  to  identify  definitely^ 

95 


96 


BITUMINOUS  COAL  MINE  ACCOUNTING 


even  down  to  the  detail  of  the  weight  of  individual  mine 
wagons — the  tonnage  produced  from  each  leased  tract. 
This  can  at  times  be  accomplished  through  the  assign- 
ment of  a  separate  set  of  miners'  checks  to  the  miners 
operating  in  such  a  leased  tract,  but  even  with,  this  safe- 
guard it  is  necessary  that  the  mining  from  these  sections 
be  given  the  closest  scrutiny  on  the  part  of  the  mine  fore- 
men, engineers  and  management,  since  in  the  develop- 
ment of  the  mine  and  the  driving  of  rooms,  boundaries  of 


Original  Copy  to  be  forwarded  to  Mining  Engineer  immediately  upon  completion  of  Pmy 
Roll.     Mining  Engineer  to  certify  and  forward  tame  promptly  to  Chief  Accountant 

Report  of  Coal  Mined 


From  .. 

r 

M«c<f  Tract 

y  Ending ...191.... 

ot Mint.    Pa. 

Chick 

CWT. 

/ 

Period  in  whi-h  Royalty  Coi.1 
Reported  Herein  wm  Mined 

Ucntion  of  Working  Pl'^cp 

Give  Number  n(  Room 
and  Entry 

■ 

No. 

Fron.           1              To 

Remark*. 

Month 

D.y 

Month 

Day 



.... 

rotM  Cwt. 

-^ 

.nd  to  th.  b..t  of  my  knowl.d,.  thl.  r.port  1.  «r«ct.                                ' 

Suptrinltndtnt 

I        .'  aV'^Z  "rtifjr  th»t  th*  working  pUc«im«ntion*d herein  artalt 
looted  in  tho  U*»«d  tract  a*  atated. 

Mining  Bn'finttp 

Form  33. — Semi-monthly  report  of  royalty  coal. 

the  various  tracts  are  frequently  crossed  and  it  becomes 
necessary  to  know  during  each  pay  period  just  where 
every  miner  is  working  and  the  date  on  which  the  prop- 
erty line  is  crossed  in  the  mining. 

Where  this  condition  prevails  it  will  be  found  useful,  if 
not  absolutely  necessary,  that  a  report  in  detail  be  made 
by  the  mine  superintendent  or  the  mine  foreman  show- 
ing the  check  number  of  the  employee  working  in  leased 
tracts,  and  the  tonnage  produced  between  pay  dates  or 
between  the  beginning  of  a  pay  and  the  date  on  which  the 
property  line  is  crossed,  each  operative  being  located  by 
working  place,  that  is,  by  number  of  room  and  entry. 

The  report  bringing  this  information,  having  been  fur- 
nished by  the  mine  official,  should  be  checked  by  the  min- 


ROYALTIES  97 

ing  engineer  against  the  mine  map  to  prove  the  location 
of  the  working  places  at  that  time  within  the  various  lease 
lines.  After  being  properly  authenticated,  this  informa- 
tion should  be  passed  to  the  accountant  as  his  record. 
For  convenience  such  a  report  should  be  prepared  on 
sheets  approximately  8%  x  13  in.  A  condensed  copy  of 
such  a  form  is  reproduced  in  Form  33. 

Eoyalty  should  include  any  payments  made  for  the 
privilege  of  mining  coal  from  leased  property.  Where 
no  minimum  tonnage  is  stipulated  in  the  lease,  or  where 
the  production  exceeds  the  minimum,  the  royalty  to  be 
charged  to  cost  monthly  is  the  number  of  tons  of  coal  pro- 
duced, multiplied  by  the  rate  per  ton,  if  payable  on  the 
tonnage  basis.  Where  the  lease  provides  for  a  yearly 
minimum  tonnage  which  is  not  mined  or  the  equivalent 
in  money,  whether  based  on  a  fixed  sum,  a  rate  per  ton, 
or  per  acre,  the  monthly  proportion  is  the  minimum  di- 
vided by  twelve. 

When  the  month's  production  does  not  equal  this 
amount  the  difference  between  the  earned  royalty  and 
the  monthly  minimum  should  be  capitalized  as  Advance 
Eoyalty,  pending  its  recovery.  When  the  recovery 
period  is  limited  under  the  lease  that  proportion  of  the 
Advance  Royalty  outlawed  or  lost  by  time  limitation 
should  be  taken  into  cost  month  by  month  by  being  cred- 
ited to  the  Advance  Royalty  account  and  charged  to  cost 
(royalty)  in  addition  to  the  regular  monthly  estimate 
based  on  current  production. 

In  some  well  considered  cases  where  the  minimum  re- 
quired is  so  large  as  to  preclude  the  possibility  of  its 
production,  tlie  monthly  minimum  may  be  charged  direct 
to  cost  rather  than  being  temporarily  capitalized  through 
the  Advance  Royalty  account. 

Care  must  be  taken  not  to  build  up  in  the  Advance 
Royalty  account  an  asset  which  cannot  be  recovered  be- 
cause of  time  limitations  stipulated  in  the  lease. 

Since  royalties  are  payable  usually  on  the  quarterly 


98  BITUMINOUS  COAL  MINE  ACCOUNTING 

basis  and  based  on  yearly  minimums,  in  the  accounting 
procedure  the  monthly  charges  should  be  made  to  *' Roy- 
alty'^ and  credits  be  set  up  to  an  account  designated 
*^ Royalty  Not  Due.''  When  payments  are  made  the 
charge  is  to  the  account  ^^ Royalty  Not  Due." 

Royalties  being  based  on  tonnage,  it  is  of  course,  es- 
sential that  before  payments  be  made  the  production  be 
balanced  against  the  shipments  since  it  frequently  hap- 
pens that  the  lease  provides  for  a  report  showing  car 
numbers  and  weights.  This  is  unnecessary  in  the  event 
the  lease  provides  as  leases  occasionally  do  for  payment 
on  the  basis  of  the  aggregate  weights  of  coal  paid  to 
miners. 


CHAPTER  IX 
DEPLETION  OF  MINERAL 

Depletion  is  an  account  set  up  to  take  care  of  the  ex- 
haustion of  mineral  products  taken  out  of  the  land.  The 
product  becomes  stock  in  trade  as  soon  as  it  is  extracted, 
and  it  naturally  follows  that  whatever  the  land  was  worth 
at  the  time  of  purchase,  or  if  revalued  at  date  of  March 
1,  1913,  it  is  worth,  after  the  extraction,  an  appreciable 
amount  less. 

Provision  should  therefore  be  made  through  depletion 
for  an  account  to  return  to  the  owner,  through  adequate 
charges  to  cost,  the  full  value  of  the  lands  purchased,  less 
any  value  existing  in  the  surface,  by  setting  aside  in  a 
reserve  fund  with  a  corresponding  charge  to  cost  of  a 
sufficient  amount  per  ton  to  return  the  investment.  Fail- 
ure to  provide  such  a  fund  will  necessarily  result  in  the 
operator  having  to  write  off  large  losses  at  the  time  of 
the  exhaustion  of  the  mineral  and  will  prevent  the  return 
to  the  stockholder  of  the  capital  invested  by  him. 

From  the  standpoint  of  taxation,  this  matter  of  the 
depletion  of  mineral  has  been  the  subject  of  voluminous 
regulation  by  the  Internal  Revenue  Bureau.  Since  their 
regulations  follow,  generally,  very  good  accounting  prac- 
tice, they  are  reproduced  below.    The  law  is  as  follows : 

"Sec.  214,  1918  Law.  (a)  That  in  computing  net  income  there  shall 
be  allowed  as  deductions: 

"In  the  case  of  mines,  oil  and  gas  wells,  other  mineral  deposits  and 
timber,  a  reasonable  allowance  for  depletion  and  for  depreciation  of 
improvements,  according  to  the  peculiar  conditions  in  each  case,  based 
upon  cost  including  cost  of  development  not  otherwise  deducted:  Pro- 
vided, That  in  the  case  of  such  properties  acquired  prior  to  March  1, 

99 


100  BITUMINOUS  COAL  MINE  ACCOUNTING 

1913,  the  fair  market  value  of  the  property  (or  the  taxpayer's  interest 
therein)  on  that  date  shall  be  taken  in  lieu  of  cost  up  to  that  date." 

The  regulations  of  the  bureau  are  much  more  full  and 
specific  than  the  law  and  provide : 

"Regulations  45 — 1918  Law 

"The  essence  of  these  provisions  of  the  statute  is  that  the  owner  of 
mineral  deposits,  whether  freehold  or  leasehold,  shall  within  the  limita- 
tion prescribed,  secure  through  an  aggregate  of  annual  depletion  and 
depreciation  deductions  the  return  of  either  (a)  his  capital  invested  in 
the  property,  or  (b)  the  value  of  his  property  on  the  basic  date,  plus 
subsequent  allowable  capital  additions,  but  not  including  land  values  for 
purposes  other  than  the  extraction  of  minerals. 

"Operating  owners,  lessors,  and  lessees,  whether  corporations  or  indi- 
viduals, are  entitled  to  deduct  an  allowance  for  depletion  and  deprecia- 
tion, but  a  stockholder  in  a  mining  or  oil  or  gas  corporation  is  not 
allowed  such  deductions." 

With  respect  to  depletion  allowed  to  the  owner,  Article 
202  is  quite  specific.    It  reads : 

"Capital  recoverable  through  depletion  deduction  in  the  ease  of  an 
operating  owner. — In  the  case  of  an  operating  owner  in  fee,  the  capital 
remaining  in  any  year  recoverable  through  depletion  and  depreciation 
deductions  is  (a)  the  cost  or  value  of  the  property  at  the  basic  date 
plus  (b)  subsequent  allowable  capital  additions  and  minus  (c)  deple- 
tion and  depreciation  sustained,  whether  legally  allowable  or  not,  from 
the  basic  date  to  the  taxable  year,  and  minus  (d)  the  value  of  the  land 
at  the  basic  date  for  other  purposes  than  mineral  production.  The 
capital  recoverable  through  depletion  is  the  total  capital  remaining  less 
the  sum  recoverable  through  depreciation." 

That  the  taxpayer  may  have  no  doubt  as  to  just  how  to 
determine  the  value  of  the  mineral,  both  when  figured 
upon  the  basis  of  cost  and  when  figured  upon  the  basis 
of  the  fair  market  value,  Article  205,  determining  cost 
and  Article  206,  determining  the  fair  market  value  as  of 
a  specified  date,  are  here  quoted : 

"Art.  205.  Determination  of  cost  of  deposits — In  any  case  in  which 
a  depletion  or  depreciation  deduction  is  computed  on  the  basis  of  the 


DEPLETION  OF  MllVlfUXL  '       '    ' 101 

cost  or  price  at  which  any  mine,  mineral  deposit,  mineral  right  or  lease- 
hold was  acquired,  the  owner  or  lessee  will  be  required  to  show  that 
the  cost  or  price  at  which  the  property  was  bought  was  fixed  for  the 
purpose  of  a  bona  fide  purchase  and  sale,  by  which  the  property  passed 
to  an  owner  in  fact  as  well  as  in  form  other  than  the  vendor.  No 
fictitious  or  inflated  cost  or  price  will  be  permitted  to  form  the  basis  of 
any  calculation  of  a  depletion  or  depreciation  deduction  and  in  deter- 
mining whether  or  not  the  price  or  cost  at  which  any  purchase  or  sale 
was  made  represented  the  actual  market  value  of  the  property  sold,  due 
weight  will  be  given  to  the  relationship  or  connection  existing  between 
the  persons  selling  the  property  and  the  buyer  thereof." 

"Art.  206.  Determination  of  fair  market  value  of  mineral  property. 
— (a)  Where  the  fair  market  value  of  the  property  at  a  specified  date 
in  lieu  of  the  cost  thereof  is  the^  basis  for  depletion  and  depreciation 
deductions,  such  value  must  be  determined,  subject  to  approval  or  re- 
vision by  the  Commissioner,  by  the  owner  of  the  property  in  the  light 
of  the  conditions  and  circumstances  known  at  that  date,  regardless  of 
later  discoveries  or  developments  in  the  property  or  subsequent  im- 
provements in  methods  of  extraction  and  treatment  of  the  mineral 
product.  The  value  sought  should  he  that  established  assuming  a  trans- 
fer between  a  willing  seller  and  a  willing  buyer  as  of  that  particular 
date.  The  Commissioner  will  lend  due  weight  and  consideration  to  any 
and  all  factors  and  evidence  having  a  bearing  on  the  market  value,  such 
as  cost,  actual  sales  and  transfers  of  similar  properties,  market  value 
of  stock  or  shares,  royalties  and  rentals,  value  fixed  by  the  owner  for 
purpose  of  the  capital-stock  tax,  valuation  for  local  or  State  taxation, 
partnership  accountings,  records  of  litigation  in  which  the  value  of  the 
property  was  in  question,  the  amount  at  which  the  property  may  have 
been  inventoried  in  probate  court,  disinterested  appraisals  by  approved 
methods  such  as  the  present  value  method  and  other  factors. 

"(&)  To  determine  the  fair  market  value  of  a  mineral  property  by 
the  present  value  method,  the  essential  factors  must  be  determined  for 
each  deposit  included  in  the  property.  The  factors  are  (1)  the  total 
quantity  of  mineral  in  terms  of  the  principal  or  customary  unit  (or 
units)  paid  for  in  the  product  marketed,  (2)  the  average  quality  or 
grade  of  the  mineral  reserves,  (3)  the  expected  percentage  of  extraction 
or  recovery  in  each  process  or  operation  necessary  for  the  preparation 
of  the  crude  mineral  for  market,  (4)  the  probable  operating  life  of  the 
deposit  in  years,  (5)  the  unit  operating  cost,  i.  e.,  cost  of  production 
exclusive  of  depreciation  and  depletion,  (6)  expected  average  selling 
price  per  unit  during  the  operating  life  and  (7)  the  rate  of  profit  com- 
mensurate with  the  risk  for  the  particular  deposit.  When  the  deposit 
has  been  sufficiently  developed,  these  factors  may  be  determined  from 
past  operating  experience.     In  the  application  of  factors  derived  from 


102^  '' '  ^  ^  ^BiTmimuvs  coal  mine  accounting 

past  experience  full  allowance  should  be  made  for  probable  future  vari- 
ations in  the  rate  of  exhaustion,  quality  or  grade  of  the  mineral,  per- 
centage of  recovery,  costs  of  production  and  selling  price  of  the  product 
marketed  during  the  expected  operating  life  of  the  mineral  deposit. 

"(c)  Mineral  deposits  for  which  these  factors  may  not  be  determined 
with  reasonable  accuracy  from  past  operating  experience  may,  with  the 
approval  of  the  Commissioner,  be  valued  in  a  similar  manner;  but  the 
factors  must  be  deduced  from  concurrent  evidence  such  as  the  general 
type  of  the  deposit,  the  characteristics  of  the  district  in  which  it  occurs, 
the  habit  of  the  mineral  deposits  in  the  property  itself,  the  intensity 
of  mineralization,  the  rate  at  which  additional  mineral  has  been  dis- 
closed by  exploitation,  the  stage  of  the  operating  life  of  the  property, 
and  other  evidence  tending  to  establish  a  reasonable  estimate  of  the 
required  factors. 

"(d)  Mineral  deposits  of  different  grades,  locations  and  probable 
dates  of  extraction  in  a  mineral  property  shall  be  valued  separately. 
The  mineral  content  of  a  deposit  should  be  determined  in  accordance 
with  article  208  in  the  case  of  mines.  ...  In  estimating  the  average 
grade  of  the  developed  and  prospective  mineral,  account  should  be  taken 
of  probable  increases  or  decreases  as  indicated  by  the  operating  history. 
The  rate  of  exhaustion  of  a  mineral  deposit  should  be  determined  with 
due  regard  to  the  limitations  imposed  by  plant  capacity,  by  the  char- 
acter of  the  deposit,  by  the  ability  to  market  the  mineral  product,  by 
labor  conditions,  and  by  the  operating  program  in  force  or  definitely 
adopted  at  the  basic  date  for  future  operations.  The  operating  life  of 
a  mineral  deposit  is  that  number  of  years  necessary  for  the  exhaustion 
of  both  the  developed  and  prospective  mineral  content  at  the  rate 
determined  as  above.  The  operating  cost  comprises  all  current  expense 
of  producing,  preparing  and  marketing  the  mineral  product  sold,  exclu- 
sive of  Federal  income,  war  profits  and  excess  profits  taxes,  allowable 
capital  additions  as  defined  in  article  222  and  deductions  for  depre- 
ciation and  depletion,  but  including  cost  of  repairs  and  replacements 
necessary  to  maintain  the  plant  and  equipment  at  its  rated  capacity  and 
efficiency.  This  cost  of  repairs  and  replacements  is  not  to  be  confused 
with  the  depreciation  deduction  by  which  the  cost  or  value  of  plant 
and  equipment  is  returned  to  the  taxpayer  free  from  tax.  In  general, 
no  estimates  of  these  factors  will  be  approved  by  the  Commissioner 
which  are  not  supported  by  the  operating  experience  of  the  property 
or  which  are  derived  from  different  and  arbitrarily  selected  periods. 

"(e)  The  product  of  the  number  of  units  of  mineral  recoverable  in 
marketable  form  by  the  difference  between  the  selling  price  and  the 
operating  cost  per  unit  is  the  total  expected  operating  profit.  The 
value  of  each  mineral  deposit  is  then  the  total  expected  operating 
profit  from  that  deposit  reduced  to  a  present  value  as  of  the  basic  date 


DEPLETION  OF  MINERAL  103 

at  the  rate  of  interest  commensurate  with  the  risk  for  the  operating  life 
and  further  reduced  by  the  value  at  the  basic  date  of  the  depreciable 
assets  and  of  the  capital  additions,  if  any,  necessary  to  realize  the 
profits." 

The  mineral  values  once  having  been  established  by- 
valuation  and  accepted  by  the  Treasury  Department  may 
not  be  altered  by  the  taxpayer  except  in  the  case  of  dis- 
covery, which  is  in  the  case  of  bituminous  coal,  difficult 
to  establish,  or  through  a  virtual  change  of  ownership, 
as  indicated  by  Article  207,  which  follows : 

"Art.  207.  Revaluation  of  mineral  deposits  not  allowed. — No  revalua- 
tion of  a  property  whose  value  as  of  the  basic  date  has  been  determined 
and  approved  will  be  allowed  during  the  continuance  of  the  ownership 
under  which  the  value  was  so  determined  and  approved,  except  in  the 
case  of  discovery  as  defined  in  articles  219  and  220.  The  value  of  the 
basic  date  may,  however,  be  corrected  when  a  virtual  change  of  owner- 
ship of  part  of  the  property  results  as  the  outcome  of  litigation  and 
may  be  redistributed  (a)  when  a  revision  of  the  number  of  units  of 
mineral  in  the  property  has  been  made  in  accordance  with  articles  208, 
209,  or  211,  and  (6)  in  case  of  the  sale  of  a  part  of  the  property,  be- 
tween the  part  sold  and  the  part  retained." 

Instructions  are  given  further  for  the  determination 
of  the  mineral  content  of  the  mine,  which  are  dealt  with 
fully  in  the  following  paragraph. 

"Art.  208.  Determination  of  mineral  contents  of  mine. — Every  tax- 
payer claiming  a  deduction  for  depletion  for  a  given  year  will  be  re- 
quired to  estimate  or  determine  with  respect  to  each  separate  property 
the  total  units  (tons,  pounds,  ounces,  or  other  measure)  of  mineral  prod- 
ucts reasonably  known  or  on  good  evidence  believed  to  have  existed  in 
the  ground  on  the  basic  date,  according  to  the  method  current  in  the 
industry  and  in  the  light  of  the  most  accurate  reliable  information 
obtainable.  Preference  shall  be  given  in  the  selection  of  a  unit  of 
estimate  to  the  principal  unit  (or  units)  paid  for  in  the  product  mar- 
keted. The  estimate  of  the  recoverable  units  of  the  mineral  products 
in  the  property  for  the  purposes  of  valuation  and  depletion  shall  in- 
clude as  to  both  quantity  and  grade  (a)  the  ores  and  minerals  4n 
sight,'  'blocked  out,'  'developed,'  or  'assured,'  in  the  usual  or  con- 
ventional meaning  of  these  terms  in  respect  to  the  type  of  the  deposit. 


104  BITUMINOUS  COAL  MINE  ACCOUNTING 

and  (&)  ^probable^  or  'prospective'  ores  and  minerals  (in  the  cor- 
responding sense) ;  that  is,  ores  and  minerals  that  are  believed  to  exist 
on  the  basis  of  good  evidence  although  not  actually  known  to  occur 
on  the  basis  of  existing  development;  but  "probable"  or  "prospective" 
ores  and  minerals  may  be  computed,  for  purposes  of  this  valuation, 
(c)  as  to  quantity,  only  in  case  they  are  extensions  of  known  deposits 
or  are  new  bodies  or  masses  whose  existence  is  indicated  by  geological 
or  other  evidence  to  a  high  degree  of  probability,  and  (d)  as  to  grade, 
of  such  richness  only  as  accords  with  the  best  indications  available.  If 
subsequent  developments  show  a  material  error  in  the  original  estimate, 
a  new  estimate  may  be  made  and  the  capital  remaining  to  be  recovered 
distributed  accordingly." 


Full  Cost  Value 

It  naturally  follows  that  when  the  full  cost  or  value  of 
materials  has  been  recovered,  no  further  charge-off 
should  be  allowed.  This  provision  is  dealt  with  in  Article 
210,  which  follows : 

Art.  210.  "Computation  of  deduction  for  depletion  of  mineral  de- 
posits.—  (a)  Depletion  attaches  to  the  annual  production  'according  to 
the  peculiar  conditions  of  each  case'  and  when  the  depletion  actually 
sustained,  whether  legally  allowable  or  not,  from  the  basic  date,  equals 
the  cost  or  value  on  the  basic  date  plus  subsequent  allowable  capital 
additions,  no  further  deduction  for  depletion  will  be  allowed  except  in 
consequence  of  added  value  arising  through  discovery  or  purchase. 

"(b)  When  the  value  of  the  property  at  the  basic  date  has  been  de- 
termined, depletion  for  the  taxable  year  shall  be  detennined  by  dividing 
(he  value  remaining  for  depletion  by  the  number  of  units  of  mineral  to 
which  this  value  is  applicable  and  by  multiplying  the  unit  value  for 
depletion,  so  determined,  by  the  number  of  units  sold  within  the  taxable 
year.  In  the  selection  of  a  unit  for  depletion  preferences  shall  be  given 
to  the  principal  or  customary  unit  or  units  paid  for  in  the  product  sold." 

The  rights  of  the  lessee  to  recover  the  cost  of  acquiring 
a  leasehold  or  the  value  existing  in  leasehold  rights  at  the 
time  of  purchase  or  at  date  of  revaluation,  March  1,  1913, 
are  recognized  and  provision  made  in  the  laws  of  1918 
and  1920,  but  not  in  prior  laws,  to  amortize  them  through 
proper  depletion  deductions  as  follows : 


DEPLETION  OF  MINERAL  105 

Art.  203.  "Capital  recoverable  through  depletion  deductions  in  the 
case  of  lessee. — (a)  In  the  case  of  a  lessee,  the  capital  remaining  in  any 
year  recoverable  through  depletion  and  depreciation  deductions  is  (1) 
the  value  as  of  the  basic  date  of  the  lessee's  equity  in  the  property  plus 
(2)  subsequent  allowable  capital  additions  but  minus  (3)  depletion  and 
depreciation  sustained,  whether  legally  allowable  or  not,  from  the  basic 
date  to  the  taxable  year.  The  capital  recoverable  through  depletion  is 
the  total  capital  remaining  less  the  sum  recoverable  through  depre- 
ciation. 

"(b)  The  value  of  the  equities  of  lessor  and  lessee  shall  be  computed 
separately,  but,  when  determined  as  of  the  same  basic  date  shall  to- 
gether never  exceed  the  value  at  that  date  of  the  property  in  fee  simple. 

"(c)  The  value  of  a  lessee's  equity,  if  acquired  prior  to  March  1, 
1913,  is  the  value  of  his  interest  in  the  mineral  as  of  that  date. 

"((?)  The  value  of  a  lessee's  equity  in  a  proven  mineral  property  ac- 
quired on  or  after  March  1,  1913,  is  its  cost. 

"(e)  The  value  of  a  lessee's  equity  in  a  discovery  on  or  after  March 
1,  1913,  is  the  fair  market  value  at  date  of  discovery  or  within  30  days 
thereafter,  of  his  equity  in  the  mineral  discovered." 

The  Accounting  Procedure 

In  the  case  of  mining  property  which  has  been  re- 
valued at  date  of  March  1,  1913,  for  the  purpose  of  de- 
pletion, it  is  desirable  that  the  appreciation  be  set  up  on 
the  books  in  a  way  which  will  permit  the  proper  records 
for  depletion  based  on  cost  and  for  the  additional  deple- 
tion due  to  the  revaluation.  To  accomplish  this  an  addi- 
tional asset  account  should  be  set  up  on  the  books.  As- 
suming the  increase  in  value  to  be  $100,000  the  accounting 
procedure  will  be  as  follows: 

Dr.  Cr. 

Property  Ke valuation  3/1/13 $100,000.00 

To  Surplus  from  Revaluation  at  3/1/13  $100,000.00 

Assuming  the  exhaustion  of  mineral  to  be  at  the  rate 
of  $2,000  monthly,  $1,000  being  a  portion  of  the  original 
value  and  $1,000  a  portion  of  the  appreciation,  the  ac- 
counting entry  will  be  as  follows : 

Dr.  Cr. 

Depletion $2,000.00 

To  Property  Revaluation $1,000.00 

Depletion  Reserve   $1,000.00 


106  BITUMINOUS  COAL  MINE  ACCOUNTING 

Or  if  preferred  to  not  reduce  the  asset  account  credit 
will  be  to  a  Property  Kevaluation  Reserve  Account. 

Since  a  depletion  account,  being  part  of  the  operating 
expense,  will,  through  yearly  closing  entries,  land  in  and 
reduce  the  surplus  account,  it  is  necessary  that  an  addi- 
tional entry  be  made  to  transfer  the  proper  proportion 
from  the  special  surplus  from  revaluation  to  the  earned 
surplus  account,  the  account  entry  being  as  follows : 

Dr.  Gr. 

Surplus  from  Revaluation  3/1/13    $12,000.00 

To  Earned  Surplus  $12,000.00 

It  is  important  that  this  adjustment  be  properly  made, 
since  the  realized  appreciation  from  the  revaluation  at 
March  1,  1913,  is  not  taxable  and  as  long  as  taxes  have 
not  been  fully  determined  under  the  Excess  Profits  Tax 
laws  it  is  necessary  that  the  earned  surplus  be  adjusted 
through  the  transfer  to  it  of  all  items  which  are  proper, 
realized  appreciation  being  one  of  them. 

The  same  procedure  will  be  necessary  in  the  case  of 
amortization  of  leasehold  values,  it  being  only  necessary 
to  properly  designate  the  names  of  the  accounts  to  indi- 
cate that  the  appreciation  is  one  of  leasehold  value  rather 
than  of  physical  property. 


CHAPTER  X 
AMORTIZATION  OF  LEASEHOLD  VALUES 

The  question  is  frequently  asked  as  to  what  benefit  a 
lessee  can  obtain  in  connection  with  allowances  covering 
the  amortization  of  leasehold  values  in  connection  with 
his  returns  to  the  Internal  Revenue  Bureau. 

Some  leases  have  values  aggregating  very  large 
amounts,  and  as  a  rule  the  lessees  have  failed  to  recog- 
nize this  element  of  value  or  to  claim  anything  by  way  of 
a  deduction  from  income  for  the  depletion  or  amortiza- 
tion of  such  leasehold  values. 

The  difficulty  has  been  to  find  some  definite  means  of 
establishing  the  worth  of  such  property. 

If  the  owner  of  such  a  lease  will  take  the  trouble  to 
prove  his  valuation  he  may  frequently  very  materially 
decrease  his  taxable  income  through  such  deductions. 

Valuation  may  be  determined,  in  some  instances,  upon  I 
the  basis  of  sales  of  contiguous  property.  In  the  case  in 
which  a  taxpayer  has  a  lease  at  a  rate  of  royalty  lower 
than  the  average  of  other  properties  similarly  situated 
he  may  in  many  instances  be  able  to  have  the  Treasury 
Department  recognize  the  value  of  this  favorable  differ- 
ential based  on  the  number  of  tons  of  coal  remaining  in 
the  tract  to  be  removed  over  a  reasonable  length  of  time, 
reduced  to  present  worth. 

For  instance,  A  may  have  a  tract  of  coal  on  which  he 
has  a  lease  calling  for  a  royalty  of  6  cents  per  ton.  He 
may  be  surrounded  by  leaseholds  in  similar  coal  no  better 
situated  than  is  his  in  which  the  contract  rate  of  royalty 
may  be,  for  example,  ?,  8,  10,  12  or  15  cents,  an  average 
of  10.4  cents  per  ton.     It  is  only  reasonable  to  assume 

107 


108  BITUMINOUS  COAL  MINE  ACCOUNTING 

that  this  advantageous  lease  has  some  value  for  the  pur- 
pose of  depletion,  and  if  the  case  is  properly  presented 
to  the  Treasury  Department  such  values  will  frequently 
be  accepted. 

The  Internal  Eevenue  laws  prior  to  1918  did  not  per- 
mit such  a  deduction  for  depletion.  The  law  of  1918  and 
the  present  revenue  law,  however,  provide  that  the  ap- 
preciation of  mineral  lands  to  March  1,  1913,  may  be  ap- 
portioned equitably  between  the  lessor  and  the  lessee. 

In  the  case  of  leases  taken  up  prior  to  March  1,  1913, 
it  frequently  happens  that  those  which  were  held  for  a 
number  of  years  had  a  very  considerable  value  as  meas- 
ured by  the  difference  between  the  amount  of  the  royalty 
per  ton  at  the  time  when  the  lease  was  made  and  the 
going  rate  of  royalty  at  March  1,  1913.  In  this  instance, 
this  difference  may  be  set  up  as  an  asset  and  recovered 
through  proper  deductions  for  depletion  or  more  prop- 
erly speaking,  amortization  of  leasehold  value. 

While  values  must  be  placed  upon  the  leasehold  as  at 
March  1,  1913*  in  the  case  of  those  companies  whose  his- 
tory extends  back  of  that  time,  the  operating  results 
prior  to  that  date  may  be  taken  into  consideration  as 
showing  the  trend  of  earnings,  and  indeed,  since  no  man 
can  in  the  light  of  what  he  now  knows  to  be  true,  pro- 
ject himself  backward  to  a  mental  condition  as  of  March 
1,  1913,  it  necessarily  follows  that  the  results  of  opera- 
tion since  that  date,  eliminating  of  course  the  abnormal 
years  of  1917  and  1918,  and  possibly  even  1919  and  1920, 
may  be  taken  into  consideration  in  fixing  a  rate  per  ton 
of  profit  from  the  mining  operation. 

The  years  of  life  of  such  an  operation  based  on  past 
experience,  may  be  reasonably  estimated  by  any  compe- 
tent engineer,  and  the  prospect  for  future  production  and 
margin  of  profit  reasonably  realizable  can  be  estimated 
by  past  history  also. 

The  prospective  future  returns  from  such  mining 
operations  reduced  to  a  present  worth  at  March  1^  1913, 


AMORTIZATION  OF  LEASEHOLDS  109 

or  at  the  date  of  acquisition  of  the  lease  if  subsequent 
to  that  date  may,  if  properly  proven,  be  accepted  by  the 
Treasury  Department  as  the  leasehold  value  for  the 
purpose  of  depletion,  and  in  the  case  in  which  such  lease- 
hold were  paid  into  the  company  in  exchange  for  its 
capital  stock  and  had  a  value  greater  than  the  amount  of 
stock  issued  therefor,  this  additional  value  may,  when 
approved  by  the  Treasury  Department  be  set  up  as  ad- 
ditional invested  capital  arising  through  the  medium  of 
a  paid-in  surplus. 

It  may  be  pertinent  in  this  matter  to  call  attention  of 
taxpayers  to  the  regulations  of  the  Treasury  Depart- 
ment to  the  effect  that  the  combined  value  to  be  allowed 
to  the  lessor  and  lessee  must  be  equitably  apportioned 
between  them,  and  the  position  of  the  Treasury  Depart- 
ment is  that  the  combined  allowance  of  the  lessor  and 
lessee  shall  not  exceed  the  amount  which  would  be  al- 
lowed were  the  operator  claiming  for  a  value  of  fee  coal. 

In  leases  of  long  standing,  due  to  the  lapse  of  time  and 
the  appreciation  in  values,  the  value  at  March  1,  1913, 
per  ton  of  mineral  has  frequently  advanced  beyond  the 
amount  per  ton  of  the  royalty  and  in  such  instances  the 
lessor  may  possibly  have  no  taxable  income,  but  values 
must  of  course  be  proved  to  the  satisfaction  of  the  In- 
ternal Revenue  Bureau. 

Too  frequently  lessee  operators  claim  no  value  for 
leaseholds  because  they  have  paid  nothing  for  them,  but 
particularly  in  the  case  of  leases  which  have  been  run- 
ning for  a  number  of  years  it  can  frequently  be  definitely 
determined  that  they  have  a  considerable  value,  which  in 
some  instances  might  be  sold  and  in  many  instances,  may 
at  least  be  recognized  by  the  Internal  Revenue  Bureau 
for  the  purpose  of  an  adequate  deduction  from  income, 
based  on  the  depletion  of  the  mineral. 

The  Questionnaire. — ^In  order  to  standardize  the  proof 
which  is  required  for  the  purpose  not  only  of  depletion 
of  fee  minerals,  but  also  of  leasehold  values,  the  Treas- 


110  BITUMINOUS  COAL  MINE  ACCOUNTING 

ury  Department  has  prepared  their  questionnaire,  Form 
E,  which  has  been  sent  to  most  coal  operators.  This 
questionnaire  gives  the  operator  in  reasonable  detail  an 
opportunity  to  report  on  the  history  of  his  company  and 
to  prove  his  values. 

The  table  of  cost,  selling  price  and  profits  per  ton  at 
the  end  of  the  questionnaire  provides  a  convenient  me- 
dium for  showing  what  have  been  the  operating  profits 
of  the  company  during  past  years,  eliminating,  it  will  be 
noticed,  all  of  the  activities  of  the  company  not  directly 
connected  with  the  production  and  sale  of  coal. 

To  determine  whether  or  not  the  filing  of  Form  E  is 
mandatory  representatives  of  the  Internal  Kevenue 
Bureau  were  interviewed  and  make  the  statement  that  if 
an  operator  expects  to  get  any  allowance  for  depletion, 
either  of  fee  property  or  amortization  of  leasehold  val- 
ues, he  will  have  to  prove  those  values  by  filing  Form  E 
properly  filled  out  with  the  Treasury  Department. 

Treasury  Department  Statement. — As  to  the  use  of 
the  form  in  question,  the  following  semi-official  statement 
has  been  obtained  from  the  Treasury  Department : 

"The  questionnaire  is. designed  to  bring  out  certain  information  es- 
sential for  the  compilation  of  tax  returns  on  coal  properties  so  that  a 
fair  and  accurate  knowledge  of  the  subject  may  be  presented  to  the  tax 
examiner.  Such  information  is  a  basis  for  both  taxation'  and  'exemp- 
tions' therefrom. 

"On  page  1  (cover)  the  information  required  is  for  proper  filing, 
enabling  the  case  to  be  referred  to,  by  the  year,  by  its  filing  number, 
by  the  taxpayer's  name,  and  by  the  location  of  the  property.  Thus 
any  chance  for  confusion  as  to  the  identity  of  a  property  is  avoided, 
and  all  data  is  readily  referred  to  in  the  Government  files. 

"Page  2  contains  valuable  suggestions  to  the  taxpayer,  designed  to 
assist  him  in  making  his  returns,  and  should  be  given  careful  study  be- 
fore answering  any  part  of  the  questionnaire." 

The  information  called  for  on  page  3  is  designed  to  set 
forth  a  complete  record  of  ownership  of  taxable  property 
referred  to,  as  well  as  to  draw  the  attention  of  the  exam- 


AMORTIZATION  OF  LEASEHOLDS  111 

iner  to  any  possible  connection  between  this  taxpayer 
and  any  other.  In  this  manner  any  confusion  that  might 
arise  from  inter-relation  between  properties,  or  officers 
of  properties,  is  avoided. 

"Paragraph  (4)  History.  The  information  under  this  heading  should 
be  used  as  a  foundation  for  the  case  and  sets  up  all  the  transfers  of 
title  that  might  have  a  bearing  on  claims  for  depletion  or  depreciation. 
This  information,  in  connection  with  the  description  (5)  that  follows, 
should  absoUitely  establish  the  identity  and  ownership  of  the  property 
in  question. 

"6.  Description  of  Coal  relates  to  the  coal  found  on  the  property, 
and  is  essential  to  an  accurate  estimate  of  the  taxpayer's  rights  to 
claim  depletion.    The  seam  that  is  worked  should  be  indicated. 

"7.  Description  refers  to  the  property  and  equipment  rather  than 
to  the  mineral  in  place,  and  is  designed  to  set  forth  capacity  and  con- 
ditions of  operation  so  that  the  conditions  governing  the  mining  of  coal 
at  this  property  may  be  fully  undei-stood.  The  table  (page  6)  included 
under  this  head  is  designed  to  set  forth  whether  the  coal  is  mined  by 
the  owner  or  not,  and  also  sets  forth  his  activities  in  any  leaseholds,  all 
of  which  information  affects  the  depletion  allowance. 

"8.  Purchase.  The  information  called  for  under  this  head  is  neces- 
sary in  setting  up  invested  capital  claims. 

"9.  Valuation.  It  is  necessary  that  the  taxpayer  clearly  set  up  a 
valuation  of  his  property  as  a  whole,  in  detail.  Furthermore,  the  date 
at  w^hich  this  value  applies  should  be  clearly  stated  so  that  any  appre- 
ciation or  depreciation  since  that  date  may  be  estimated.  The  un- 
exhausted tonnage  referred  to  must  only  be  figured  for  the  seam  or 
seams  that  are  actually  being  worked,  and  should  be  separated.  Other 
seams  that  may  or  may  not  be  worked  in  the  future  should  not  he  in- 
cluded in  this  valuation,  but  this  should  not  preclude  notation  of  them. 
It  sometimes  happens  that  a  property  is  sold  in  the  middle  of  a  fiscal 
year,  hence  the  necessity  for  filling  out  the  data  in  paragraph  (d), 
which  should  cheek  with  the  returns  received  later  from  the  purchaser. 

On  pages  9  and  10  the  cost  table  based  on  a  ton  unit  should  be  care- 
fully filled  in  for  each  of  the  years  of  which  records  are  available. 
All  these  figures  are  to  be  based  on  a  ton  per  year  unit  (total  yearly 
figure  divided  by  total  tons  produced  in  that  year).  If  any  of  the 
items  are  not  known  or  not  carried  on  the  books,  the  space  provided 
for  this  information  should  be  cheeked  off. 

"To  be  of  value  this  information  should  be  prepared  with  the  utmost 
accuracy  and  care,  hence  the  sworn  acknowledgment  appearing  on  the 
last  page. 


112  BITUMINOUS  COAL  MINE  ACCOUNTING 

Form  34  — Present  Worth  of  Each  Dollar  of  Operating  Profit. 

Accumulated  during  life  of  "n"  years,  assuming  annual  rate  of  produc- 
tion and  operating  profits  per  unit  to  be  uniform  and  providing  for  interest 
on  Present  Worth  at  "r"  per  cent  annually  and  a  payment  into  a  sinking 
fund  which  at  four  per  cent,  interest  compounded  annually,  will  amount 
to  the  Present  Worth,  i.e.,  provide  for  return  of  capital,  at  the  end  of  life. 


Yrs.   6 

7 

8 

9 

10 

11 

12 

per  cent 

per  cent 

per  cent 

per  cent 

per  cent 

per  cent 

per  cent 

1 

0.943396 

0.934579 

0.925925 

0.917431 

0.909090 

0.900910  0.892857 

2 

0.908766 

0.892946 

0.876891 

0.861777 

0.847176 

0.833062  0.819408 

3 

0.876389 

0.853937 

0.832607 

0.812317 

0.792993 

0.774578  0.756976 

4 

0.846052 

0.818370 

0.792418 

0.768072 

0.745178 

0.723608  0.703254 

5 

0.817570 

0.785469 

0.755780 

0.728260 

0.702675 

0.678824  0.656540 

6 

0.790781 

0.754961 

0.7212245 

0.692177 

0.664641 

0.639166  0.615547 

7 

0.765540 

0.726638 

0.691435 

0.659519 

0.630410 

0.603769  0.579284 

8 

0.741717 

0.700174 

0.663032 

0.629635 

0.599440 

0.572008  0.546979 

9 

0.719198 

0.675487 

0.636765 

0.602251 

0.571286 

0.543347  0.518017 

10 

0.697880 

0.652354 

0.612404 

0.577066 

0.545581 

0.517355  0.491906 

11 

0.677672 

0.630699 

0.589748 

0.553820 

0.522019 

0.493671  0.468244 

12 

0.658489 

0.610277 

0.568624 

0.532281 

0.500344 

0.472001  0.446702 

13 

0.640258 

0.591066 

0.548887 

0.512330 

0.480337 

0.452107  0.427009 

14 

0.622911 

0.572950 

0.530401 

0.493737 

0.461815 

0.433770  0.408936 

15 

0.606385 

0.555828 

0.513053 

0.476390 

0.444619 

0.416821  0.392292 

16 

0.590625 

0.539630 

0.496741 

0.460167 

0.428610 

0.401104  0.376914 

17 

0.575581 

0.524283 

0.481376 

0.443963 

0.413671 

0.386493  0.362663 

18 

0.561205 

0.509716 

0.466880 

0.430685 

0.399699 

0.372873  0.349420 

19 

0.547455 

0.496371 

0.453178 

0.417253 

0.386603 

0.360147  0.337082 

20 

0.534292 

0.482719 

0.440211 

0.404592 

0.374302 

0.348230  0.325559 

21 

0.521680 

0.470171 

0.427920 

0.392637 

0.362729 

22 

0.509587 

0.458216 

0.416255 

0.381334 

0.351818 

23 

0.497979 

0.446805 

0.405166 

0.370630 

0.341517 

24 

0.486835 

0.435903 

0.394619 

0.360479 

0.331775 

25 

0.476122 

0.425477 

0.384571 

0.350840 

0.322549 

26 

0.465820 

0.415496 

0.374988 

0.341675 

0.313799 

27 

0.455905 

0.405935 

0.365839 

0.332951 

0.305488 

28 

0.446356 

0.396767 

0.357096 

0.324637 

0.297587 

29 

0.437155 

0.387970 

0.348734 

0.316704 

0.290063 

30 

0.428283 

0.379520 

0.340726 

0.309127 

0.282893 

31 

0.419724 

0.371399 

0.333054 

0.301886 

32 

0.411462 

0.363589 

0.325695 

33 

0.403483 

0.356072 

0.318631 

■ 

34 

0.395772 

0.348832 

0.311846 

35 

0.388318 

0.341856 

0.305324 

FACTORS  IN  ABOVE  TABLE  = 

36 

0.381108 

0.335128 

0J299049 

37 

0.374130 

0.328637 

0.293009 

pn 

1 

38 

0  367375 

0.322371 
0.316318 
0.310468 

0.287190 
0.281581 
0.276171 

39 

0.360832 
0.354491 

n     ar 

-' 

40 

Rn- 

-1   +  "' 

41 

0.348345 

0.304811 

0.270950 

Derived 

from  Hoskold's  For-" 

42 

0.342385 

0.299339 

0.265909  inula.  Present  value  of  $1.00  per 

43 

0.336602 

0.294043 

0J261038  annum  in 

n  vears. 

interest  on 

44 

0.330990 

0.288913 

0.256328  capital  being  at  one  rate,  r',  and 

^=   Pn 

45 

0.325540 

0.283945 

0.251774  for  redemption  another  rate.  r. 

46 

0.320248 

0.279128 

0.247367  per  cent. 

47 

0.315107 

0.274459 

0.243100  pn  - 

1    ,  where  Rn  =  (I 

4-r)  n 

48 

0.310109 

0.269929 

0.238967 

49 

0  305250 

0  2655.S3 

0  234062 

r 

_L   r' 

60 

0.300525 

0.261266 

0.231079 

Rn 

1+   "^ 

AMORTIZATION  OF  LEASEHOLDS 


113 


FOEM  35. 

— Pbesent  Value  of 

•  $1.00  Due 

IN  Yeabs  Hence  at  the 

Following 

Rates  Pee 

Cent. 

6 

7 

8 

9 

10 

11 

12 

Yrs. 

,  per  cent 

per  cent 

percent 

per  cent 

per  cent 

per  cent 

per  cent 

1 

.943396 

.934579 

.925926 

.917431 

.909091 

.900901 

.892857 

2 

.889996 

.873439 

.857339 

.841680 

.826446 

.811622 

.797194 

3 

.839619 

.816298 

.793832 

.772183 

.751315 

.731191 

.711780 

4 

.792095 

.762895 

.735030 

.708425 

.683013 

.658731 

.635518 

5 

.747258 

.712886 

.680583 

.649931 

.620921 

.593451 

.567427 

6 

.704961 

.666342 

.630170 

.596267 

.564474 

.534641 

.506631 

7 

.665057 

.622749 

.583490 

.547034 

.513158 

.481658 

.452349 

8 

.627412 

.582009 

.540269 

.501866 

.466507 

.433926 

.403883 

9 

.591898 

.543934 

.500249 

.460428 

.424098 

.390925 

.360610 

10 

.558395 

.508349 

.463193 

.422411 

.385543 

.352184 

.321973 

11 

.526788 

.475093 

.428883 

..387533 

.350494 

.317283 

.287476 

12 

.496969 

.444012 

.397114 

.355535 

.318631 

.285841 

.256675 

13 

.468839 

.414964 

.367698 

.326179 

.289664 

.257514 

.229174 

14 

.442301 

.387817 

.340461 

J299246 

.263331 

.231995 

.204620 

15 

.417265 

.362446 

.315242 

.274538 

.239392 

.209004 

.182696 

16 

.393646 

.338735 

.291890 

.251870 

.217629 

.188292 

.163122 

17 

.371364 

.316574 

.270269 

.231073 

.197845 

.169633 

.145644 

18 

.350344 

.295864 

.250249 

.211994 

.179859 

.152822 

.130039 

19 

.330513 

.276508 

.231712 

.194490 

.163508 

.137678 

.116107 

20 

.311805 

.258419 

.214548 

.178431 

.148644 

.124034 

.103667 

21 

.294155 

.241513 

.198656 

.163698 

.135130 

.111742 

.092560 

22 

.277505 

.225713 

.183941 

.150182 

.122846 

.100669 

.082642 

23 

.261797 

.210947 

.170315 

.137781 

.111678 

.090692 

.073788 

24 

.246979 

.197147 

.157699 

.126405 

.101526 

.081705 

.065882 

25 

.232999 

.184249 

.146018 

.115968 

.092296 

.073608 

.058823 

26 

.219810 

.172195 

.135202 

.106393 

.083905 

.066313 

.052521 

27 

.207367 

.160930 

.125187 

.097608 

.076278 

.059742 

.046893 

28 

.195630 

.150402 

.115914 

.089548 

.069343 

.053822 

.041869 

29 

.184557 

.140563 

.107328 

.082154 

.063039 

.048488 

.037383 

30 

.174110 

.131367 

.099377 

.075371 

.057308 

.043683 

.033378 

31 

.164255 

.122773 

.092016 

.069148 

.052099 

.039354 

.029802 

32 

.154957 

.114741 

.058200 

.063438 

.047362 

.035454 

.026609 

33 

.146182 

.107235 

.078889 

.058200 

.043057 

.031940 

.023758 

34 

.137912 

.100219 

.073045 

.053395 

.039142 

.028775 

.021212 

35 

.130105 

.093663 

.067635 

.048986 

.035584 

.025924 

.018939 

36 

.122741 

.087535 

.062625 

.044941 

.032349 

.023355 

.016910 

37 

.115793 

.081809 

.05'/ 986 

.041231 

.029408 

.021040 

.015098 

38 

.109239 

.076457 

.053690 

.0378E6 

.026735 

.018955 

.013481 

39 

.103056 

.071455 

.049713 

.034703 

.024304 

.017077 

.012036 

40 

.097222 

.066780 

.046031 

.031838 

.022095 

.015384 

.010747 

41 

.091719 

.062412 

.042621 

.029209 

.020086 

.013860 

.009595 

42 

.0865)27 

.058329 

.039464 

.026797 

.018260 

.012486 

.008567 

43 

.081630 

.054513 

.036541 

.024584 

.016600 

.011249 

.007649 

44 

.077009 

.050946 

.033834 

.022555 

.015091 

.010134 

.006830 

45 

.072650 

.047613 

.031328 

.020692 

.013719 

.009130 

.006098 

46 

.068538 

.044499 

.029007 

.018984 

.012472 

.008225 

.005445 

47 

.064658 

.041587 

.026859 

.017416 

.011338 

.007410 

.004861 

48 

.060998 

.038867 

.024869 

.015078 

.010307 

.006677 

.004340 

49 

.057546 

.036324 

.023027 

.014659 

.009370 

.006014 

.003875 

50 

.054288 

.033948 

.021321 

.013449 

.008518 

.005418 

.003460 

114  BITUMINOUS  GOAL  MINE  ACCOUNTING 

"It  must  be  borne  in  mind  that  inaccuracies  and  absence  of  informa- 
tion on  this  return,  works  to  the  disadvantage  of  the  taxpayer  by  de- 
priving him  of  his  argument  for  seeking  exemptions. 

"This  questionnaire  has  been  reduced  to  the  utmost  minimum  and 
deals  only  with  information  absolutely  necessary,  duplication  being- 
eliminated.  A  frank  and  clean-cut  presentation  of  the  facts  will  in 
every  case  hasten  the  results  desired,  and  if  so  presented  will  reduce 
the  expense  of  handling  tax  matters,  both  to  the  taxpayer  and  the 
Government." 


Table  Used  by  the  Internal  Kevenue  Bureau  to  Deter- 
mine Fair  Market  Value  at  March  1,  1913 

As  has  been  heretofore  shown,  the  Treasury  Depart- 
ment requires  very  detailed  information  in  connection 
with  the  fixing  of  values  for  depletion  of  owned  mineral 
and  the  amortization  of  leasehold  values.  Forms  34  and 
35,  printed  on  pages  112  and  113,  are  used  by  them  in 
arriving  at  the  present-value  of  eventual-earnings. 

Leaseholds  from  the  Standpoint  of  the  State  for  the 
Purpose  of  Taxation. — In  recent  years  the  various 
states  have  found  that  the  taxing  of  mining  leases  is  a 
good  source  of  adding  to  their  revenues,  and  a  number  of 
coal  producing  states  have  made  coal  leases  subject  to 
such  a  tax.  In  this  connection  it  may  be  of  value  to 
examine  the  practise  of  one  of  the  states  in  question  in 
arriving  at  values  for  this  purpose.  Instructions  issued 
by  Walter  S.  Hallanan,  Tax  Commissioner  of  West  Vir- 
ginia, to  local  assessors  are  of  interest  since  they  contain 
a  decision  of  the  supreme  court  of  that  state  which  goes 
into  the  subject  in  considerable  detail. 

The  Tax  Commissioner's  instructions  follow: 

Coal  Leaseholds  or  Chattels  Real 

"To  arrive  at  the  proper  value  of  a  coal  lease  will  in  many  instances 
be  quite  difficult,  but  with  the  proper  investigation  and  with  the  infor- 
mation that  can  be  derived  from  the  owner  of  the  lease  and  others,  an 
equitable  and  fair  valuation  for  taxation  can  be  obtained.  In  the  first 
place  it  will  be  necessary  to  know  the  terms  of  the  lease,  which  you 


AMORTIZATION  OF  LEASEHOLDS  115 

can  get  from  the  owners  of  the  leasehold  or  at  the  county  clerVs  office 
from  the  records;  also  the  rentals  or  royalties  to  be  paid,  the  life  of 
the  lease,  the  size  of  the  vein  and  quality  of  the  coal,  the  facilities  for 
output,  and  the  capacity  of  the  mine;  the  character,  kinds  and  extent 
of  the  improvements  and  the  adaptability  to  the  purpose  for  which 
they  are  used." 

Supreme  Court  Illustrates. — The  Supreme  Court  in 
the  case  of  Dillon  vs  Bare  and  Carter,  63  W.  Va.  483, 
gives  the  following  splendid  illustration  as  to  how  to 
arrive  at  the  valuation  of  a  coal  leasehold : 

"All  coal  leases  on  producing  jnines  yield  a  royalty  to  the  lessor. 
These  royalties  vary  in  amount  from  5  as  high  as  10  cents  per  ton, 
and  perhaps  more  in  some  eases.  If  a  lease  is  paying  as  royalty  such 
an  amount  that  neither  he  nor  anybody  else  could  afford  to  work  the 
mine  and  to  pay  a  larger  royalty,  it  is  obvious  that  he  could  not  sell 
his  right  of  user  in  the  market  for  any  considerable  amount  of  money. 
But  if  his  royalty  is  low  enough  to  enable  him  to  work  the  mine  at 
a  good  profit,  he  could  sell  it  for  something,  if  he  desired  to  go  out  of 
business,  and  his  lease  were  assignable,  or  if  it  were  not  assignable 
without  the  consent  of  the  lessor,  and  that  consent  could  be  obtained. 

"Or  if  the  royalty  were  low  enough  so  that  the  lessee  can  make, 
not  only  a  reasonable  profit  to  himself  by  working  the  mine,  but  could 
also  pay  a  much  larger  royalty  and  still  work  the  mine  profitably, 
then  his  right  of  user  would  command  a  good  price  in  the  market.  If, 
for  instance,  he  pays  royalties  amounting  to  $6,000  a  year  at  5  cents 
a  ton  and  could  afford  to  double  that  royalty  and  still  work  the  mine 
profitably,  there  is  an  advantage  in  the  lease  to  him  of  $6,000  a  year 
in  addition  to  his  reasonable  profits,  arising  from  the  operation  of  the 
mines.  If  that  $6,000  be  regarded  as  the  equivalent  of  the  income  from 
a  sum  of  money  invested  at  6  per  cent,  amounting  to  $100,000,  and  the 
deposit  of  coal  were  unlimited  and  inexhaustible,  the  market  value  of 
that  lease,  the  mere  right  of  user,  would  be  at  least  $100,000  and  it 
ought  to  be  taxed  upon  that  much." 

In  valuing  coal  property,  the  assessor  might  find  it  a 
good  idea  to  reach  the  value  of  the  whole  plant;  that  is, 
each  coal  producing  plant  could  be  treated  as  a  going 
concern,  an  organic  working  whole.  These  are  the  meth- 
ods commonly  employed  in  arriving  at  the  value  of  the 
property  for  commercial  purposes  or  taxation. 


116  BITUMINOUS  COAL  MINE  ACCOUNTING 

Property  for  purposes  of  taxation  is  worth  just  as 
much  as  it  is  for  purposes  of  income  and  sale.  Whatever 
value  a  coal  plant  would  bring  if  offered  for  sale  upon 
such  terms  as  such  property  is  usually  sold,  it  is  worth 
for  purposes  of  taxation.  Now,  when  you  arrive  at  the 
value  of  a  plant  as  a  whole  it  is  an  easy  matter  to  ap- 
portion this  value  between  the  lessor  and  lessee  if  the 
plant  is  operated  on  leased  premises. 

Suppose  for  example  that  Eichard  Koe  owns  two  tracts 
of  coal  land  of  1,000  acres,  worth  approximately  $100  an 
acre.  One  of  these  tracts  he  leases  to  John  Doe  at,  say 
a  royalty  of  10  cents  per  ton,  and  the  other  he  operates 
himself.  In  the  first  case  there  is  a  leasehold  to  value 
while  in  the  second  case  there  is  none.  The  coal  plants 
and  improvements  for  the  purpose  of  mining  coal  upon 
these  two  tracts  are  of  the  same  value,  approximately. 
Eichard  Eoe  spends  $300,000  in  the  development  of  his 
thousand  acres.  John  Doe,  to  whom  he  leased  the  other 
thousand  acres,  spends  $300,000  in  the  development  of 
his  leasehold.  The  result  is,  they  both  have  good  mines 
of  equal  value  in  the  market. 

The  assessor  comes  to  Eichard  Eoe  to  assess  his  real 
estate.  He  finds  that  the  1,000  acres  from  which  he  is 
mining  coal,  upon  which  he  owns  the  improvements  and 
upon  which  he  has  spent  $300,000,  is  a  valuable  plant, 
a  money-making  concern,  and  can  be  sold  in  the  market, 
as  a  going  concern,  as  a  commercial  proposition,  that  is, 
the  1,000  acres  of  land,  improvements  and  all,  for  $700,- 
000.  This  is  the  market  value  of  the  1,000  acres  owned 
and  operated  by  .Eichard  Eoe  and  he  has  no  right  to  com- 
plain. The  valuation  of  $100,000  is  therefore  assessed 
as  real  estate  and  entered  upon  the  land  book  in  the  name 
of  Eichard  Eoe  and  is  apportioned  as  land  and  improve- 
ments. 

But  how  about  the  other  1,000  acres  which  has  been 
leased  to  John  Doe?  By  investigation  the  assessor  as- 
certained that  this  thousand  acres  is  under  lease  for  coal- 


AMORTIZATION  OF  LEASEHOLDS  117 

mining  purposes.  He  also  ascertains  by  investigation 
that  the  two  plants  are  alike  in  every  respect,  except  one 
tract  is  leased  and  the  other  is  not.  The  assessor  also 
finds  that  the  total  value  of  the  plant  located  upon  the 
land  leased  by  Kichard  Eoe  to  John  Doe,  including  land, 
improvements,  etc.,  is  $700,000;  that  the  average  royalty 
received  from  the  leased  tract  by  the  owner,  Eichard 
Eoe,  at  10  cents  per  ton  is  $20,000  annually ;  that  the  land 
is  of  no  value  except  for  coal  purposes ;  that  he  derives 
no  income  from  same  except  the  royalty  on  the  coal. 

Eichard  Eoe  informs  the  assessor  that  on  account  of 
the  fact  that  the  constant  mining  of  coal  will  soon  destroy 
and  render  the  entire  tract  of  land  worthless,  that  no 
investor  would  buy  the  coal  land,  encumbered  by  the 
lease,  as  it  is,  unless  he  could  make  a  profit  of  at  least 
10  per  cent,  and  that  the  top-notch  price  the  leased  land 
would  bring  in  the  market  is  $200  per  acre,  and  that  the 
$20,000  royalty  would  give  the  investor  10  per  cent  upon 
his  investment,  and  the  land  has  a  prospective  life  of, 
say,  thirty  years. 

The  assessor,  upon  this  information,  assesses  Eichard 
Eoe  with  the  1,000  acres  of  leased  land  upon  the  land 
books  at  $200,000,  or  $200  an  acre,  the  value  which  it 
properly  has  from  the  standpoint  of  an  investment,  and 
the  price  at  which  it  could  be  sold  in  the  market.  Eich- 
ard Eoe  has  then  been  assessed  with  all  the  property 
he  has. 

He  then  goes  to  John  Doe,  who  is  the  owner  of  the 
leasehold  on  Eichard  Eoe's  1,000  acres  of  land.  He  finds 
that  it  cost  John  Doe  $300,000  to  install  the  plant  and  get 
ready  to  ship  coal;  he  has  already  found,  however,  that 
the  entire  value  of  the  plant,  land,  improvements,  and 
everything  is  $700,000.  He  has  also  found  $200,000,  or 
$200  an  acre,  to  be  the  value  of  the  land  and  has  assessed 
that  to  Eichard  Eoe,  the  land  owner.  He  finds  $300,000 
in  improvements  or  fixtures  attached  to  the  land  but  not 
included  in  the  valuation  thereof,  assesses  them  to  John 


118  BITUMINOUS  COAL  MINE  ACCOUNTING 

Doe  as  personal  property  and  enters  the  amount  in  the 
personal  property  book  in  column  ^*P.''  See  Sec.  61, 
Chap.  29,  Code ;  also  Carter  vs  Tyler  County,  45  W.  Va. 
806.  There  is  $200,000  remaining  which  should  be  as- 
sessed as  the  value  of  the  leasehold  to  John  Doe  as  per- 
sonal property  and  entered  in  the  personal  property  book 
in  column*^ PP.'' 

Thus  we  have  the  two  tracts  of  land;  one  leased  and 
the  other  not,  both  of  equal  value,  equally  and  fairly 
assessed,  without  any  discrimination  whatever,  against 
the  owner  of  the  leasehold.  The  two  plants  are  of  equal 
value  and  they  are  equally  assessed.  By  finding  the  ag- 
gregate value  of  a  plant,  as  a  whole,  and  then  appor- 
tioning the  valuations  between  the  land  owner  and  the 
owner  of  the  leasehold,  as  they  should  be,  no  injustice  will 
be  done  any  interest. 

In  assessing  coal  property  it  is  vastly  better  to  proceed 
upon  the  unit  theory,  find  the  value  of  a  plant  as  a  whole 
where  this  can  be  done,  and  then  distribute  the  property 
upon  the  land  and  personal  property  books. 


CHAPTEE  XI 
DEPRECIATION 

Depreciation  is  the  loss  in  the  value  of  an  asset  through 
the  effect  of  use,  time,  or  obsolescence,  and  the  deprecia- 
tion account  attempts  to  measure  in  dollars  and  cents  the 
loss  of  value.  In  an  operating  plant  this  loss  is  due  pri- 
marily to  use,  and  even  when  a  property  is  idle  depre- 
ciation continues  through  rust  and  decay.  In  the  case  of 
coal  mines,  depreciation  of  plant  and  equipment  keeps 
step  with  the  exhaustion  of  the  coal,  for  when  the  mineral 
has  been  exhausted  or  the  right  to  mine  has  elapsed 
through  the  passage  of  time,  the  plant  and  equipment 
have  little  or  no  value  and  the  development  is  lost. 

In  the  report  of  the  Cost  Accounting  Committee  of  the 
National  Coal  Association,  the  following  remarks  are 
pertinent  to  coal  mines : 

"Capital  investment  in  a  coal  mine  is  not  a  permanent  asset;  it  is 
only  an  outlay  preliminary  to  the  extraction  of  the  coal ;  it  is  merely  an 
advanced  or  deferred  charge  upon  future  income,  which  capital,  if 
recovered,  must  be  recovered  with  the  current  expenses  of  operation 
out  of  the  proceeds  of  coal  sold. 

"By  dividing  the  cost  of  the  mine  by  the  total  number  of  tons  prac- 
tically recoverable  through  present  shafts  and  openings,  the  rate  per 
ton  necessary  to  redeem  such  cost  will  be  found. 

"In  Coal  Mining  the  exact  unit  for  the  measurement  of  work  done 
is  the  ton  of  coal  mined.  It  is  also  the  exact  unit  for  measuring 
depletion  of  mineral,  wear  and  tear  from  use  of  equipment,  and  ex- 
haustion of  development.  Development  is  a  mere  easement,  the  value 
of  which  disappears  when  the  coal  is  gone. 

"A  coal  mine  being,  as  emphasized,  made  up  of  several  elements,  all 
depreciating  as  the  coal  is  mined,  such  depreciation  is  composite,  accru- 
ing at  a  rate  concurrent  with  the  rate  of  extraction.  The  necessary  rate 
per  ton  being  determined,  the  aggregate  depreciation  for  any  account- 

119 


120  BITUMINOUS  COAL  MINE  ACCOUNTING 

ing  period  should,  of  course,  as  far  as  practical,  be  distributed  among 
the  various  elements  in  proportion  to  their  respective  costs  or  value. 

"The  doctrine  that  measures  depreciation  of  coal  mine  plant  and 
equipment  in  terms  of  time  (excepting,  of  course,  some  leasehold  propo- 
sitions) is  fallacious,  as  tested  by  the  further  assertion  that  a  com- 
pletely equipped  mine  could  be  maintained  indefinitely  without  deple- 
tion or  wear  and  tear  if  no  coal  were  mined,  by  minor  repairs. 

"Therefore,  we  insist,  as  a  general  rule — excepting  some  leaseholds — 
that  the  correct  measure  of  the  depletion  and  depreciation  experienced 
in  mining  coal  is  the  ton  of  coal  mined. 

"After  a  coal  mine  has  been  developed  and  equipped  to  its  planned 
output  capacity,  charges  to  its  Capital  Account  should  cease,  and 
thereafter  there  will  be  few  if  any  permissible  charges  to  that  account." 

The  question  of  the  adequacy  of  a  rate  per  cent  which 
will  make  good  accrued  appreciation  and  keep  step  with 
accruing  depreciation,  is  a  very  difficult  one,  particularly 
when  applied  to  the  mining  industry,  but  under  no  sound 
accounting  practice  can  provision  for  such  losses  be 
omitted.  Indeed,  the  English  courts  have  held  that  pro- 
vision must  be  made  for  any  assets  lost  or  wasted  in 
the  process  of  earning  profits,  whether  they  are  fixed  or 
circulating,  and  in  the  case  of  Bond  vs  Barrow  Hematite 
Co.  have  held  that  an  amount  expended  in  mines,  blast 
furnaces  and  cottages  which  were  afterwards  abandoned, 
must  be  regarded  as  circulating  capital  and  made  good 
before  dividends  could  be  paid  out  of  surplus. 

It  should  be  made  a  rule  from  the  beginning  of  an 
operation  that  depreciation  shall  be  fixed  at  a  rate  which, 
during  the  life  of  the  coal,  will  certainly  return  the  capi- 
tal invested,  and  this  rate,  whether  a  percentage  or  a 
rate  per  ton,  having  been  determined,  should  be  adhered 
to  strictly,  unless  conditions  arise  which  will  warrant  a 
departure  from  the  established  practice,  either  through 
additions  to  plant ;  through  the  finding  of  areas  barren  of 
mineral  resulting  in  an  increased  rate  per  ton,  or  by  the 
addition  of  acreage  to  be  removed  through  the  same  open- 
ings, resulting  in  a  decreased  rate  per  ton.  In  this  con- 
nection the  regulations  of  the  Internal  Eevenue  Bureau, 


DEPRECIATION  121 

which  permit  depreciation  to  be  figured  either  on  a  per- 
centage basis  or  on  a  per  ton  basis,  are  quite  interesting 
and  specific  and  for  information  are  reproduced  below : 

Reference,  1918  Law  Regulations  45. 

"Art.  224.  (a)  The  Act  provides  that  deductions  for  depreciation  of 
improvements  'according  to  the  peculiar  conditions  in  each  case'  may  be 
taken  by  a  taxpayer  owning  or  leasing  mining  property.  This  is 
deemed  to  include  exhaustion  and  wear  and  tear  of  the  property  used 
in  mining  of  deposits,  comprising  a  reasonable  allowance  for  obso- 
lescence. 

"(6)  It  shall  be  optional  with  the  taxpayer,  subject  to  the  approval 
of  the  Commissioner,  (1)  whether  the  value  of  the  mining  property 
plus  allowable  capital  additions  but  minus  estimated  salvage  value  shall 
be  recovered  at  a  rate  established  by  current  exhaustion  of  mineral,  or 
(2)  whether  the  value  of  the  mineral  deposit  on  the  basic  date  plus 
allowable  capital  additions  shall  be  recovered  through  depletion  and  the 
cost  of  plant  and  equipment  less  the  estimated  salvage  value  shall  be 
recovered  by  reasonable  charges  for  depreciation  at  the  rate  deter- 
mined by  its  physical  life  or  its  economic  life  or,  according  to  the 
peculiar  conditions  of  the  case,  by  a  method  satisfactory  to  the  Com- 
missioner. 

"(c)  The  estimated  physical  life  of  a  plant  or  unit  thereof  (includ- 
ing buildings,  machinery,  apparatus,  roads,  railroads,  and  other  equip- 
ment and  improvements  whose  principal  use  is  in  connection  with  the 
mining  or  treatment  or  other  necessary  handling  of  mineral  products) 
may  be  defined  as  the  estimated  time  such  plant,  or  unit,  when  given 
proper  care  and  repair  can  be  continued  in  use  despite  physical  de- 
terioration, decay,  wear,  and  tear. 

"{d)  The  estimated  economic  life  of  a  plant  or  unit  thereof  is  the 
estimated  time  during  which  the  plant  or  unit  may  be  utilized  effec- 
tively and  economically  for  its  intended  purposes  and  may  be  limited 
by  the  life  of  the  property  or  of  that  portion  of  the  mineral  deposits 
which  it  serves  but  can  never  exceed  the  physical  life. 

"(e)  Any  difference  between  the  salvage  value  of  plant  and  equip- 
ment and  the  sum  remaining  to  be  recovered  through  depreciation  at  the 
termination  of  mining  operations  shall  be  returned  as  profit  or  loss  in 
the  year  in  which  it  is  realized. 

"(/)  Nothing  in  these  regulations  shall  be  interpreted  as  meaning 
that  the  value  of  a  mining  plant  and  equipment  may  be  reduced  by 
depreciation  deductions  to  a  sum  below  the  value  of  the  salvage  when 
the  property  shall  have  become  obsolete  or  shall  have  been  abandoned 
for  the  purpose  of  mining.     In  estimating  the  salvage  value  of  the 


122  BITUMINOUS  COAL  MINE  ACCOUNTING 

equipment  at  the  end  of  its  estimated  economic  life  due  consideration 
may  be  given  to  its  specialized  character  and  the  cost  of  dismounting 
and  dismantling  and  transporting  it  to  market. 

"{g)  Nothing  in  these  regulations  shall  be  interpreted  to  permit 
expenditures  charged  to  expense  in  any  taxable  year  or  any  part  of 
the  value  of  land  for  purposes  other  than  mining  to  be  recovered  through 
depletion  or  depreciation." 

It  has  too  frequently  been  the  custom  in  past  years  in 
many  lines  of  industry  to  use  a  high  depreciation  rate  in 
years  of  prosperity  and  to  lower  the  depreciation  rate  in 
hard  times.  This  is  neither  just  nor  scientific  and  the 
method  is  not  permitted  by  the  Internal  Eevenue  Bureau. 
Failure  to  recognize  the  fact  of  accruing  and  accrued  de- 
preciation in  years  prior  to  the  incidence  of  the  Income 
Tax  Law  led  many  taxpayers  into  difficulties  with  the 
Treasury  Department.  This  was  particularly  true  with 
corporations,  where,  in  order  that  the  invested  capital  on 
Jan.  1,  1917,  might  be  determined,  the  Treasury  Depart- 
ment insisted  upon  an  adequate  rate  of  depreciation  being 
applied  to  the  operation  of  the  plant  during  its  years  of 
existence  prior  to  that  date,  which,  because  of  the  fact 
that  depreciation  had  not  been  properly  taken  into  con- 
sideration, when  set  up  under  the  instructions  of  the  In- 
ternal Eevenue  Bureau,  frequently  resulted  in  practically 
wiping  out  any  surplus  then  existing  upon  the  books. 

The  fact  that  property  may  be  revalued  at  March  1, 
1913,  for  the  purpose  of  depreciation,  as  well  as  for  the 
purpose  of  depletion,  has  not  been  as  clearly  understood 
by  taxpayers  as  it  might  be.  Kecently  the  Treasury  De- 
partment recognized  the  injustice  of  its  former  position 
and  in  a  statement  by  the  Committee  of  Appeals  and  Ke- 
view,  signed  by  N.  T.  Johnson,  Chairman,  and  dated  July 
16, 1921,  after  being  noted  by  Carl  A.  Mapes,  Solicitor  of 
Internal  Eevenue,  recognition  is  given  to  the  fact  that 
depreciation  and  obsolescence  may  be  arrested  through 
the  keeping  up  of  the  plant  by  adequate  repairs.  This  is 
indicated  by  the  following  quotations  from  the  memoran- 


DEPRECIATION  123 

dum  referred  to,  and  while  the  application  is  directed  to 
the  question  of  invested  capital,  it  follows  that  if  values 
exist  in  the  physical  asset  due  to  its  having  been  kept  up 
to  a  high  productive  value,  necessarily  the  life  of  that 
asset  is  extended  and  the  rate  of  depreciation  will  be  cor- 
respondingly reduced. 

"It  follows  that  any  action  on  the  part  of  a  particular  taxpayer  which 
extends  the  useful  life  of  a  depreciable  asset  beyond  the  normal  or 
usual  term,  and  any  circumstance  which  serves  to  increase  the  salvage 
value  of  a  depreciable  asset,  operates  to  justify  a  reduction  in  the 
normal  rate  of  depreciation.  The  depreciation  of  an  asset  is  arrested 
where  it  is  maintained  at  a  high  standard  of  efficiency  either  by  the 
exercise  of  unusual  care  in  its  use  or  by  unusual  maintenance  expendi- 
tures. 

"Invested  capital,  as  defined  in  the  Excess  Profits  Tax  Law,  is  a 
statutory  concept  and  is  composed  of  two  elements:  (a)  original  con- 
tribution and  (b)  earnings  of  the  corporation  available  for  distribu- 
tion but  not  distributed  and  not  dissipated  by  subsequent  operating 
losses. 

"The  exhaustion  of  this  capital  through  use,  wear  and  tear  has,  for 
the  purpose  of  computing  invested  capital,  the  same  effect  as  an  operat- 
ing loss  and  unless  this  loss  is  property  taken  care  of  out  of  earnings 
in  one  way  or  another,  earned  surplus  must  be  adjusted  in  accordance 
with  the  provisions  of  the  regulations. 

"There  are  two  ways  of  taking  care  of  this  loss  out  of  income.  One 
is  by  charging  ordinary  repairs  directly  to  expense  and  setting  up  a 
depreciation  reserve  against  which  are  properly  chargeable  all  re- 
newals and  replacements ;  the  other  is  where  renewals  and  replacements, 
as  well  as  repairs,  have  been  charged  directly  against  gross  income. 
Either  way  has  the  effect  of  reducing  the  amount  added  during  the 
year  to  earned  surplus. 

"Consequently,  the  mere  fact  that  no  depreciation,  or  a  minimum 
depreciation,  has  been  charged  as  such,  is  not  sufficient  reason  for  re- 
ducing the  earned  surplus,  where  renewals  and  replacements  sufficient 
to  care  for  the  decrease  in  value  of  capital  assets  have  been  charged 
directly  to  expense,  or  where  for  any  of  the  other  reasons  hereinbefore 
suggested  less  than  the  normal  rate  of  depreciation  is  properly  charge- 
able. When  a  taxpayer  makes  this  claim  there  are  two  methods  of 
verifying  it.  One  is  by  determining  the  plant  efficiency  and  the  other 
is  by  determining  the  value  of  the  capital  assets  remaining.  From  an 
administrative  standpoint  the  latter  is  probably  more  practical  even 
though  it  may  be  said  that  the  former  is  more  accurate. 


124  BITUMINOUS  COAL  MINE  ACCOUNTING 

"Many  cases  have  been  brought  to  the  attention  of  the  Committee 
where  corporations  have  been  in  existence  for  a  long  period  of  years, 
some  of  which  corporations  have  been  in  existence  several  times  the 
ordinary  estimated  life  of  the  depreciable  assets,  and  yet  those  assets 
are  to-day  in  first-class  condition  and  worth  the  figure  at  which  they 
are  carried  on  the  books,  although  no  depreciation  has  been  charged 
as  such  and  no  additions  to  capital  account  have  been  made.  In  such 
cases  it  is  obvious  that  depreciation  has  been  adequately  cared  for  by 
charges  to  expense,  although  it  frequently  happens  that  it  is  impossible 
at  this  late  date  to  segregate  and  specify  such  charges  and  there  is  no 
warrant  in  the  law  or  the  regulations  for  requiring  the  depreciable 
assets  in  such  cases  to  be  written  down  below  the  figure  at  which  they 
are  carried  on  the  books,  since  to  do  so  is  to  reduce  earned  surplus 
twice,  once  through  the  original  charge  to  expense  (whether  proper 
or  improper),  and  again  through  an  arbitrary  depreciation  charge  re- 
quired by  the  Bureau  to  be  set  up  against  earned  surplus  for  the  pur- 
pose of  computing  invested  capital. 

"The  controlling  rule  in  this  matter  is  found  in  that  part  of  Article 
839  of  Regulations  45,  which  reads:  'Adjustments  in  respect  of  depre- 
ciation or  depletion  in  prior  years  will  be  made  or  permitted  only  upon 
the  basis  of  affirmative  evidence  that  as  at  the  beginning  of  the  taxable 
year  the  amount  of  depreciation  or  depletion  written  off  in  prior  years 
was  insufficient  or  excessive,  as  the  case  may  be.'  Mere  failure  in  prior 
years  to  have  written  off  on  the  books  the  maximum  or  ordinary  rate  of 
depreciation,  is  not  in  itself  affirmative  evidence.'  There  is  no  warrant 
for  reducing  earned  surplus  because  of  alleged  failure  to  charge  off 
sufficient  depreciation  in  the  past,  unless  the  depreciable  assets  of  the 
corporation  are  valued  on  its  books  at  the  beginning  of  the  taxable 
year  at  an  amount  in  excess  of  their  sound  value  at  that  time." 

Much  of  the  difficulty  in  setting  up  depreciation  ade- 
quate to  return  the  capital  invested  would  have  been 
eliminated  had  the  practice  of  figuring  depreciation  in 
coal  mines  upon  the  basis  of  exhaustion  been  more  gen- 
erally in  use.  Frequent  disagreements  appear  in  all  dis- 
cussions as  to  the  useful  life  of  any  class  of  equipment 
and  these  discussions  could  always  have  been  avoided  by 
letting  each  ton  of  coal  possible  to  produce  bear  a  pro- 
portionate share  of  the  value  of  the  plant. 

The  Government  has  recognized  the  effect  of  overtime 
production  on  depreciation.  The  question  of  overtime  is 
not  a  prominent  one  in  the  bituminous  coal  industry,  but 


DEPRECIATION  125 

since  the  average  number  of  working  days  in  the  bitumi- 
nous coal  industry  has  never  been  anything  near  like  the 
number  of  possible  calendar  working  days  in  the  year,  the 
days  of  operation,  averaging  almost  full  time  during  the 
war  years,  amounted  in  fact  to  a  condition  resembling  the 
overtime  feature  of  other  industries  and  many  operators 
doubtless  found  the  ordinary  percentage  rate  of  deprecia- 
tion too  low.  In  the  cases,  however,  where  depreciation 
was  figured  on  a  per  ton  basis,  the  volume  of  deprecia- 
tion automatically  kept  step  with  the  volume  of  coal  ex- 
haustion. 

Taking  all  of  these  conditions  into  consideration,  the 
following  formula  for  figuring  depreciation  in  the  coal 
mine  may  generally  be  recommended. 

Divide  the  amount  of  capital  invested  in  the  plant  and 
equipment  (including  development  unless  that  has  been 
added  to  the  mineral  value,  to  be  covered  by  depletion 
charges)  by  the  estimated  number  of  tons  which  it  will 
be  commercially  possible  to  mine,  and  charge  Operating 
Account  monthly  with  an  amount  based  upon  such  rate 
per  ton  multiplied  by  the  number  of  tons  mined,  with 
credit  to  Depreciation  Eeserve  account. 

As  the  investment  account  may  be  increased  from  year 
to  year  by  charges  for  new  installations  which  substan- 
tially increase  the  capacity  of  the  mine  or  substantially 
reduce  its  operating  cost,  or  decreased  by  credit  for  units 
demolished,  sold  or  scrapped,  the  rate  may  be  changed 
from  year  to  year  so  as  to  provide  fairly  for  the  com- 
plete extinguishment  of  the  investment  account  during 
the  period  of  the  mine's  operation.  The  scrap  value  of 
the  few  remaining  units  at  the  end  of  such  period  is 
negligible  in  computation  of  the  depreciation  rate. 

When  units  are  demolished,  sold  or  scrapped,  the  books 
value  (to  be  ascertained  by  taking  the  original  cost  and 
deducting  therefrom  such  portion  of  Depreciation  Ee- 
serve account  as  the  cost  of  the  unit  bears  to  the  total 
of  the  investment  account  at  that  time)  less  the  amount 


126  BITUMINOUS  COAL  MINE  ACCOUNTING 

realized  for  the  units  will  be  chargeable  to  Operating  Ac- 
count as  Additional  Depreciation. 

It  will  be  noted  that  the  regulations  of  the  Treasury 
Department  permit  the  option  on  the  part  of  the  tax- 
payer, of  figuring  depreciation  on  the  basis  of  depletion 
or  the  exhaustion  of  mineral,  or  of  calculating  it  on  a 
rate  per  cent.  In  the  opinion  of  the  writer  the  former  is 
preferable  because  practically  all  element  of  guess  is 
eliminated,  for  if  the  rate  per  ton  is  properly  established 
the  investment  will  certainly  be  redeemed  ton  for  ton, 
with  the  removal  of  the  mineral.  Objection  has  been 
made  to  this  method  on  the  grounds  that  the  additions 
to  the  plant  account  from  year  to  year  will  cause  a  higher 
rate  of  depreciation  in  the  latter  years  of  the  operation. 
The  answer  to  this  objection  is  that  the  items  of  equip- 
ment which  should  be  capitalized  in  these  latter  years  are 
properly  very  few,  since  a  proper  accounting  practice 
would  dictate  that  all  expenditures  made  for  minor  items 
of  equipment  such  as  motors,  mine  cars,  rail,  copper  wire, 
etc.,  necessary  to  maintain  but  not  to  increase  production 
should  be  treated  as  items  of  expense.  Of  course,  if  the 
equipment  so  installed  is  such  that  the  production  is  in- 
creased it  should  be  capitalized  with  a  consequent  in- 
crease in  the  monthly  charge  for  depreciation  under 
either  method  of  calculation,  which  would  be  brought 
about  by  a  higher  rate  per  ton  if  figured  on  the  basis  of 
depletion,  or  an  additional  value  for  depreciation  if  the 
basis  is  a  rate  per  cent. 

For  the  benefit  of  those  who  prefer  the  percentage 
method  the  following  tables  of  rates,  applicable  to  coal 
mining  properties,  which  are  commonly  used  by  the 
Treasury  Department  are  reproduced. 


DEPRECIATION 


127 


FoBM  36. — Depreciation  Table. 

COAL   MINES. 


Kinds  of 
Equipment 


Mining  Section,  based  on  physical  condition 
No.l     No.  2     No.  3    No.  4    No.  6    No.  6 


Tipple  CFrame,  Steel )    Life  of  Property 

Head  Frame Life  of  Property 

Power  Plant  7           7           7 

Pumps    5         10           7 

Motors   10         10         10 

Mine  Cars  4           4           4 

Mules,  Horses    4           4           4 

Cables  and  Haulage 2           2           2 

Electric  Equipment 7         10           7 

Houses  ( Brick,  Concrete,  Frame )  Life  o 

Mining  Machines 7           8           7 

Hand   Tools    1           1           1 

Timbers  Life  of  Property  6 

Ptails    5         10           8 

Wire  and  Trolleys    7         10           7 

Locomotives    10         10         10 

Bee  Hive  Ovens    10         10 

By  Product  Ovens    12         15 

Washeries   Life  of  Property 

No.  1  Anthracite;  No.  2  Pa.  (Bituminous),  W.  Va.,  Ill;  No.  3  Ky.,  Tenn., 

Ga.,  Ohio,  Ind.;  No.  4  Mo.,  Kans.,  Iowa,  Ark.,  Okla.,  Ala.;  No.  5  Texas,  N. 

and  S.  Dakota;  No.  6  Wy.,  Mont.,  Colo.,  N.  M.,  Utah  and  Wash. 


7 

7 

7 

5 

7 

7 

10 

10 

10 

4 

4 

4 

4 

4 

4 

2 

2 

2 

5 

10 

7 

5 

8 

8 

1 

1 

1 

6 

6 

10 

5 

10 

10 

5 

10 

7 

10 

10 

10 

10 

10 

10 

15 

15 

15 

128 


BITUMINOUS  COAL  MINE  ACCOUNTING 


Form  37. — Table  of  Depbeciatiox  Values 
(coal  mines  and  equipment) 


Bituminous  Mines 
Pennsylvania,  West  Vir- 
ginia,  Illinois 

Magazine    

Wash-house    

Barn-surface    

Barn-mine    

Conveyor  belts    

Hoisting  shaft 

Cage,   self-dump    

fixed    

Air  shaft  cage 

headframe    

hoist    

stairway  

Car  lift 

Chain  haul 

Automatic  eager 

Underground   repair    shop 

equipment     

Mining  machines: 

Puncher    

Chain    

Mine   cars    

electric    

Mine  tracks: 

Mule  roads    

Main  entries   

Cross  entries   

Room  and  panel   

Stoppings : 

Wood 

Brick  or  concrete 

Ovsrcasts   

Mules  or  horses    

Ventilating   doors    

Telephones    ■. 

Fire   appliances    


Term 

of  Shortest 

Life  Life 

Years  Known 


Average 
Life 


Rate  of 
Yearly 
Depre- 
ciation 


10 

10-20 
15 
20 
3-10 


3- 

5- 
10 
10 
10 
10 
10 

7 

7 

15 


4-20 
4-18 

3-  8 
7-35 

12 

16-20 
10-20 
10 

4 
15-30 

15-30 


10 
20 
15 
20 
14 
of  M 

5 

8 
10 
10 
10 
10 
10 

7 

7 

15 

8 


5 
15 

12 
15 
15 
10 

4 
25 

25 
4 
2 
6 

10 


6  2/3 

15 

12  1/2 

$58-$602 

7(^  per  ton 

6-$251-$448 

8  1/3 
6  2/3 
6  2/3 
10 

25 

4 


CHAPTER  XTI 
INSURANCE  AND  TAXES 

Insurance  and  Taxes. — The  fire  insurance  account  in- 
cludes the  amount  paid  for  insurance  upon  the  operating 
plant,  including  improvements,  machinery  and  equip- 
ment, the  dwellings  and  any  other  property  around  a 
mine  which  can  be  covered  by  fire  insurance.  There 
should  be  no  argument  needed  to  convince  the 
operator  that  he  should  carry  an  amount  of  insur- 
ance which  is  adequate  to  protect,  as  nearly  as  may 
be  under  the  rules  of  the  insurance  companies,  the 
replacement  value  of  his  property  as  of  the  present  date. 
Unfortunately,  because  of  the  lack  of  adequate  fire  pro- 
tection, most  of  the  insurance  policies  are  so  written  as 
to  require  the  insured  to  be  a  co-insurer  for  a  consider- 
able portion  of  the  value,  usually  running  as  high  as  25 
per  cent. 

Because  of  the  high  cost  of  fire  insurance,  it  not  infre- 
quently happens  that  the  operator  carries  a  smaller 
amount  than  is  adequate  to  protect  himself  thoroughly. 
The  laws  of  most  states  require  the  insurance  companies 
to  be  authorized  to  do  business  within  that  state  and  in 
some  cases  they  are  specific  as  to  the  rates  which  may  be 
charged.  Where  this  is  not  true,  the  underwriters'  asso- 
ciations usually  take  care  of  the  same  thing  and  the  re- 
sult is  that  as  far  as  rates  are  concerned,  there  is  little 
chance  for  discrimination  as  between  operators  with  like 
conditions. 

Not  a  little  money,  however,  may  be  saved  through 
having  competent  fire  insurance  engineers,  or  the  people 
connected  with  the  rate  bureaus  of  the  various  under- 

129 


130  BITUMINOUS  COAL  MINE  ACCOUNTING 

writers'  associations,  examine  the  property  from  time 
to  time  and  make  recommendations  as  to  what  fire  haz- 
ards may  be  removed  in  order  to  obtain  reduced  rates. 
Frequently  these  are  not  at  all  expensive  and  the  reduc- 
tion in  rate  will  more  than  pay  in  a  single  year  for  the 
expense  of  making  alterations  in  buildings  or  the  provid- 
ing of  portable  fire  extinguishers  recommended. 

Careful  consideration  should  be  given  at  the  time  of 
placing  orders  for  fire  insurance  that  items  which  are  of 
a  nature  which  would  prevent  their  being  destroyed  by 
fire  be  eliminated  from  the  values  insured.  These  are 
such  things  as  stone  and  concrete  foundations  of  the 
power-house,  boiler  rooms,  etc.,  the  heavy  foundations 
of  fixed  machinery,  which  would  at  most  be  damaged  but 
not  destroyed  and  in  some  cases  the  walls  and  covering 
of  steam  boilers,  etc.  The  fact  is  not  as  generally  known 
as  it  should  be  among  those  buying  fire  insurance,  that 
the  contents  of  a  building  on  mine  property  always  takes 
the  same  rate  as  the  building  itself. 

In  the  placing  of  fire  insurance  on  a  number  of  plants 
or  on  the  various  items  of  each  plant,  considerable  money 
sometimes  can  be  saved  by  placing  blanket  insurance,  in 
which  case  the  rate  is  figured  as  an  average  by  rating 
each  building  at  its  own  value  and  obtaining  an  average 
thereby. 

In  the  case  of  these  blanket  policies,  from  the  account- 
ing standpoint,  it  is  important  that  subdivision  be  made 
so  that  the  cost  of  insurance  for  units  in  the  operating 
plant  may  be  kept  separate  from  the  value  of  houses, 
stocks  of  merchandise,  etc. 

This  is  usually  easy  of  accomplishment  because  of  the 
fact  that  while  it  is  possible  in  most  states  to  insure 
miners '  dwellings  for  a  three  or  five  year  period  at  a  re- 
duced rate,  insurance  of  the  operating  plant  proper  is 
usually  placed  for  a  single  year  and  it  becomes  advan- 
tageous to  place  separate  policies  on  these  different  prop- 
erties.   The  cost  of  the  premium  on  the  operating  plant 


INSURANCE  AND  TAXES  131 

is,  of  course,  a  proper  charge  to  cost.  The  cost  of  the 
insurance  of  miners*  houses  is  a  portion  of  the  cost,  pro- 
vided the  miners '  dwellings  are  so  treated  in  the  account- 
ing. The  insurance  on  stocks  of  merchandise  should,  of 
course,  be  kept  separate. 

The  insurance  premium  being,  as  a  rule,  payable  in 
advance,  or  in  periods  spread  over  a  year  or  more,  the 
charge  at  the  time  of  payment  should  be  made  to  an  ac- 
count designated  ^^ Insurance  Paid  in  Advance.*'  This 
account  should  be  credited  monthly  with  a  proportionate 
part  of  the  insurance  premium  and  a  charge  made  to  ^ '  In- 
surance" as  an  item  of  cost.  In  the  case  of  insurance 
on  miners'  dwellings,  the  charge  is  to  an  account  called 
'^Insurance  on  Miners'  Dwellings,"  or  it  may  be  pre- 
ferred to  make  this  charge  direct  to  a  general  account, 
^'Miners'  House  Eepairs  and  Expenses,"  but  under  any 
circumstances  the  separation  should  be  thus  made,  for 
the  failure  to  charge  all  of  the  expenses  against  the 
miners'  houses  has  had  in  the  past  a  tendency  to  mislead 
many  people  as  to  the  investment  value  of  these  houses 
in  connection  with  a  mining  plant  and  to  assume  that  they 
brought  in  a  net  revenue  when  such  supposed  revenue 
was  produced  only  by  the  failure  to  properly  charge 
dwellings  with  a  portion  of  insurance,  taxes,  etc. 

Any  one  who  has  been  called  upon  to  reach  a  settle- 
ment with  an  adjuster  of  the  fire  insurance  companies 
cannot  have  failed  to  be  impressed  with  the  absolute  ne- 
cessity of  having  proper  inventories  and  of  having  the 
items  on  such  inventories  allocated  with  respect  to  the 
buildings  in  which  the  various  equipment  or  supplies  may 
be  located. 

In  the  adjustment  of  such  fire  losses  there  is  usually 
a  difference  between  the  book  value  of  the  property  de- 
stroyed and  the  amount  received  in  settlement.  This  item 
if  a  loss,  of  course,  should  not  be  charged  direct  to  cost 
but  should  be  treated  as  a  separate  item,  and  under  the 
rules  of  the  Internal  Revenue  Bureau  is  properly  de- 


132  BITUMINOUS  COAL  MINE  ACCOUNTING 

ductible  as  expense  in  making  an  income  tax  statement. 
In  the  case  of  some  property  the  reverse  may  be  true  and, 
due  to  the  fact  that  the  book  value  of  the  property  de- 
stroyed may  have  been  reduced  by  charges  for  deprecia- 
tion below  its  replacement  value,  which  is  the  basis  upon 
which  such  settlements  are  usually  made,  a  book  profit 
may  be  shown  through  such  a  fire  loss  settlement. 

This  has  been  true  in  recent  years  with  respect  to 
miners'  houses  which  may  have  been  constructed  from 
material  cut  from  the  property,  for  which  an  adequate 
value  was  never  set  up  in  the  inventory.  Under  condi- 
tions such  as  these  it  is  hard  to  convince  any  one  that 
this  is  an  item  on  which  a  profit  has  accrued  during  the 
current  year  and  it  has  been  the  practice  of  some  opera- 
tors to  credit  such  an  item  to  the  Depreciation  Eeserve 
account  in  order  to  offset  the  inadequate  depreciation 
which  may  have  been  set  up  on  other  items.  Not  infre- 
quently the  value  at  March  1,  1913,  has  been  under- 
estimated in  such  cases. 

Liability  Insurance. — The  liability  insurance  account 
should  cover  the  cost  of  carrying  insurance  against  per- 
sonal injuries  to  employees  or  others  due  to  accidents  in 
and  around  the  mines.  The  accounting  may  be  one  of 
several  kinds,  namely,  where  the  insurance  is  purchased 
from  a  liability  insurance  company,  where  under  state 
laws  it  is  paid  to  workmen's  compensation  funds  of  the 
states,  or  where  it  may  be  carried  as  a  fund  by  the  opera- 
tor himself  or  through  mutual  agreement  with  other 
operators. 

In  the  case  of  purchased  liability  insurance,  if  it  is 
paid  for  in  advance  the  accounting  practice  will  be  simi- 
lar to  that  for  fire  insurance.  In  most  cases,  however, 
the  amount  of  the  premium  is  based  upon  the  earnings 
of  the  employee  and  settled  for  monthly,  under  which 
condition  the  amount  of  the  premium  becomes  a  proper 
direct  charge  to  operation. 

In  the  case  of  workmen's  compensation  payments  re- 


INSURANCE  AND  TAXES  133 

quired  by  state  laws,  the  basis  may  be  fixed  upon  the  ex- 
perience of  the  preceding  year  or  some  other  period,  and 
the  monthly  proportion  may  thus  become  a  direct  charge 
to  operation  also. 

In  instances  in  which  a  company  carries  its  own  insur- 
ance fund,  the  credit  is  to  a  ''Liability  Insurance  Fund 
Reserve,'*  with  the  corresponding  charge  to  ''Insurance 
— Liability. ' '  The  amounts  paid  for  personal  injuries  are 
charged  to  the  reserve  fund. 

The  amounts  paid  to  liability  insurance  commissions 
in  accordance  with  state  compensation  laws  are  properly 
deductible  as  necessary  exp'enses  of  doing  business,  in 
connection  with  the  federal  income  tax  laws,  the  amounts 
being  charged  monthly  into  cost.  In  the  case  of  those 
companies  who  maintain  their  own  insurance  through  a 
reserve  fund,  such  monthly  charges  are  not  proper  de- 
ductions under  the  rulings  of  the  Internal  Revenue 
Bureau  for  that  purpose.  In  this  case  only  the  actual 
amounts  of  money  expended  in  settlement  of  personal 
injury  claims  may  be  so  deducted. 

There  is  still  another  class  of  insurance  which,  under 
certain  conditions,  may  be  a  proper  charge  to  the  cost 
of  operation,  namely,  the  insurance  which  is  carried  by 
some  companies  upon  the  lives  of  its  officers  or  execu- 
tives. If  the  stipulations  of  the  policies  are  such  that  no 
portion  of  the  policy  may  accrue  to  the  person  insured 
or  to  his  relatives,  but  the  value  be  paid  to  the  company 
itself,  the  cost  of  carrying  such  insurance  is  a  proper 
deduction  as  a  part  of  the  cost  of  doing  business  and 
may  be  so  handled  in  reports  to  the  Internal  Revenue 
Bureau. 

Taxes. — Taxes  are  the  amounts  paid  to  federal,  state 
and  municipal  governments,  either  on  income,  for  pur- 
poses of  local  benefit,  or  for  the  privilege  of  doing  busi- 
ness. For  the  purposes  of  cost  accounting,  they  are  of 
two  classes,  those  which  are  deductible  from  the  income 
tax  and  those  which  are  charges  against  earnings.    The 


134  BITUMINOUS  COAL  MINE  ACCOUNTING 

latter  are,  generally  speaking,  federal  income  and  excess 
profits  taxes. 

The  monthly  accounting  for  taxes  is  under  the  best 
conditions  usually  somewhat  of  an  estimate,  but  in  mak- 
ing these  estimates  it  is  desirable  that  too  much  rather 
than  too  little  be  set  up  as  a  monthly  charge.  These  are 
estimates  because  of  the  fact  that  generally  the  amount, 
particularly  in  the  case  of  state  and  county  taxes,  cannot 
be  determined  until  a  portion  of  the  fiscal  year  has 
elapsed;  and  since  each  month ^s  production  should  bear 
its  proper  proportion  of  the  taxes  as  they  accrue,  it  is 
necessary  to  make  an  estimate  of  the  amount  of  tax  which 
will  accrue  within  a  taxable  year. 

This  usually  can  best  be  done  by  comparison  with  the 
taxes  of  the  preceding  taxable  period  until  such  a  time  as 
the  tax  authorities  settle  upon  a  rate  and  a  valuation, 
which  will  make  the  estimate  a  certainty.  For  that 
reason  a  fund  or  reserve  account  should  be  set  up  to  take 
care  of  taxes.  To  this  account,  ^^Keserve  for  Taxes," 
should  be  credited  monthly  the  amount  of  taxes  accrued 
and  a  corresponding  charge  made  to  ^* Taxes"  as  a  por- 
tion of  the  cost  of  operation. 

The  federal  capital  stock  tax  is  payable  in  advance 
June  30  of  each  year,  and  strict  accounting  practice  would 
provide  that  when  paid  it  should  be  set  up  on  the  books 
as  *' Taxes  Paid  in  Advance"  and  a  proportionate  charge 
made  to  cost  monthly  to  wipe  out  the  account  within  the 
twelve  months  period. 

Taxes  such  as  those  for  pavement  of  streets,  the  laying 
of  sewers,  etc.,  usually  known  as  those  for  local  benefits, 
are,  as  a  rule,  items  which  in  most  cases  may  be  capi- 
talized. Taxes  of  this  nature  are  not  frequent  in  con- 
nection with  the  mining  industry,  unless  they  be  for  im- 
provements of  this  nature  in  towns  where  the  offices  are 
maintained. 

Taxes  on  undeveloped  coal  land,  while  deductible  for 
income  tax  purposes,  are  not  a  proper  charge  against  the 


INSURANCE  AND  TAAE8  135 

cost  of  operation.  In  some  cases  such  charges  may  be 
made  against  the  value  of  the  real  estate,  and  whether  so 
treated  or  charged  as  items  of  expense  are  properly  de- 
ductible in  the  making  of  federal  tax  returns,  since  the 
law  provides  for  the  deduction  of  all  such  taxes  paid  or 
accrued.  Where  so  handled  in  the  past  few  years,  it  has 
been  necessary  to  adjust  the  surplus  in  the  rendering  of 
tax  returns;  but  with  the  passing  of  the  excess  profits 
tax  on  Dec.  31, 1921,  this  accounting  procedure  has  again 
become  simplified. 

Income  and  excess  profits  taxes  under  the  federal  law 
are  not  a  proper  charge  to  cost  and  are  not  deductible 
in  ascertaining  net  profit  for  the  purpose  of  federal  tax 
reports,  but  are  properly  chargeable  against  income. 


CHAPTER  XIII 
GENERAL  EXPENSES 

General  Expenses. — The  general  or  administrative  ex- 
penses in  connection  with  coal  mine  operating  consist  of 
officers'  salaries,  salaries  of  the  office  and  administrative 
forces,  rent  and  miscellaneous  office  expenses  and  legal 
expenses.  These  items,  in  case  of  the  operation  of  more 
than  one  mine,  should  be  distributed  among  the  mines  on 
some  equitable  basis.  In  arriving  at  the  amounts  to 
be  charged  to  general  expense  it  is  necessary  also  to  bear 
in  mind  that  some  of  the  officers  may  also  be  engaged,  to 
some  extent,  at  least,  in  the  selling  of  the  coal. 

The  first  step  is,  therefore,  to  make  a  separation  as  be- 
tween the  items  known  as  '  ^  General  Expense ' '  and  those 
of  the  selling  organization.  This  may  have  to  be  done  on 
a  somewhat  arbitrary  method  in  some  instances,  but  the 
judgment  of  these  officers  themselves  can  usually  be  re- 
lied upon  for  making  such  a  general  subdivision. 

This  division  having  been  made,  some  basis  must  be 
obtained  for  dividing  the  expense  among  the  operations. 
Generally  speaking,  the  tonnage  basis  is  probably  the 
nearest  to  being  correct,  but  there  may  be  reasons  why 
an  arbitrary  basis  is  more  equitable.  The  time  of  the 
general  manager  or  others  of  the  staff  may  be  devoted 
to  a  considerable  extent  to  the  development  of  new  prop- 
erty, in  which  case  an  arbitrary  subdivision  will  again 
need  to  be  made.  There  may  be  affiliated  interests  not 
connected  with  the  operating  or  selling  end  which  may 
require  another  subdivision. 

The  laws  of  some  states  provide  that  the  salaries,  par- 
ticularly of  the  president  and  of  the  secretary  or  treas- 
urer, must  be  fixed  by  the  stockholders  at  the  time  of 
their  annual  meeting  and  in  the  case  of  a  number  of  com- 


GENERAL  EXPENSES  137 

panies  affiliated  under  one  management,  the  vote  passed 
at  this  annual  meeting  may  be  the  determining  factor  as 
to  the  amount  of  salary  of  some  officials  to  be  apportioned 
among  the  various  affiliated  companies. 

When  it  comes  to  the  question  of  a  division  of  the  ex- 
penses the  same  questions  are  again  met,  but  it  is  fre- 
quently possible  to  allocate  the  traveling  and  other  simi- 
lar expenses  to  some  particular  account  and  only  the  ones 
in  which  such  an  allocation  is  not  possible  need  be  dis- 
tributed. 

Office  salaries  not  otherwise  subject  to  subdivision 
should  be  pro-rated  on  a  tonnage  basis. 

Rent. — The  rent  of  office  buildings,  if  the  company's 
activities  are  confined  to  coal  mining,  should  be  pro-rated 
on  a  tonnage  basis.  In  the  event  the  rent  paid  is  for  the 
purpose  of  housing  other  activities  probably  the  best 
method  of  division  is  on  the  basis  of  floor  space  occupied 
by  different  functions  of  the  organization.  In  figuring 
this,  however,  due  consideration  should  be  given  to  the 
difference  in  value  of  floor  space  in  various  sections  of 
the  same  building. 

Legal  Expenses. — Legal  expenses,  in  the  absence  of 
specific  reasons  to  the  contrary,  should  be  pro-rated  on 
a  tonnage  basis. 

Selling  Expense. — Selling  expense  is  usually  made  up 
of  officers'  salaries  and  expenses,  salesmen's  salaries  and 
expenses,  other  office  salaries,  rent,  advertising,  com- 
missions, etc.  As  has  heretofore  been  noted  under 
the  heading  of  general  expenses,  the  officer  in  charge  of 
sales  is  frequently  connected  in  other  ways  with  the  oper- 
ation of  the  mine  and  some  careful  estimate  should  be 
made  by  him  of  the  proportion  of  his  salary  which  should 
properly  be  charged  to  the  sales  end  of  the  business. 

Generally  speaking,  the  total  quantity  of  coal  sold  from 
all  mines  should  be  the  divisor  of  these  expenses,  but 
there  may  be  some  well  considered  cases  in  which  coal 
from  a  certain  mine  needed  for  some  certain  purpose  and 


138  BITUMINOUS  COAL  MINE  ACCOUNTING 

under  a  single  contract  may  be  sold  at  comparatively 
low  expense,  whereas  from  other  mines  where  the  sales 
are  of  a  miscellaneous  character,  time  and  expense 
greatly  in  excess  of  the  other  class  may  be  necessary.  In 
this  case  no  violation  would  be  done  to  good  accounting 
principles  to  fix  an  arbitrary  figure  for  one  of  these 
classes,  but  as  a  rule  such  a  division  is  undesirable. 

Where  preparation  facilities  are  equal  it  is  usually  left 
somewhat  to  the  judgment  of  the  shipping  clerk  as  to 
the  mine  from  which  various  orders  should  be  shipped, 
and  this  is  affected  from  time  to  time  by  car  supply,  mine 
accidents,  etc. 

Salesmen's  Salakies  and  Expenses 

The  same  remarks  will  apply  to  salesmen's  salaries 
and  expenses  and  other  office  salaries.  The  rent  of  the 
main  office  will  necessarily  have  to  be  figured  either  on 
the  basis  of  square  feet  of  floor  space  or  specifically  if  a 
certain  amount  is  paid  for  quarters  of  the  sales  depart- 
ment, but  a  segregation  should  always  be  made.  Branch 
office  expenses  are  usually  easily  obtainable,  being  spe- 
cific charges. 

Advertising 

Generally  speaking  the  advertising  is  a  direct  charge 
to  sales  expense  and  should  be  so  treated.  Charges  for 
advertising  should  be  carried  on  an  accrual  basis.  If  ad- 
vertising contracts  are  entered  into  and  lump  sum  pay- 
ments are  required  at  the  time  of  placing  orders,  the  cost 
should,  of  course,  be  spread  over  a  corresponding  period. 

Commissions 

The  matter  of  accounting  for  commissions  is  a  com- 
paratively simple  one  since  the  commission  should  be  fig- 
ured on  each  invoice  and  set  up  on  the  books  at  the  time 
when  the  coal  is  invoiced  to  the  customer,  the  net  return 


GENERAL  EXPENSEt^  139 

to  the  mine  being  stated  in  the  accounts  at  a  price  less 
commissions. 

Reserve  for  Hazards  in  Coal  Mining. — The  preceding 
chapters  have  dealt  with  items  which  are  unqualifiedly 
proper  charges  to  coal  cost.  Many  accountants  consider 
that  because  of  the  hazardous  nature  of  coal  mining  with 
respect  to  the  property,  there  should  be  included  in  the 
mining  cost  a  charge  for  contingencies  or,  as  some  term 
it,  ^*  mining  hazards. '* 

Regardless  of  whether  this  is  an  item  which  is  properly 
included  in  cost,  or  is,  more  properly  speaking,  a  charge 
against  income,  there  is  no  doubt  that  a  reserve  should 
be  set  aside  out  of  earnings  to  meet  the  cost  of  such  min- 
ing hazards  when  and  if  these  contingencies  occur.  This 
reserve  account  provides  against  such  catastrophes  and 
abnormal  losses  as  explosions,  squeezes,  caving  of  sur- 
face, floods  and  mine  fires  which  are  not  and  cannot  be 
covered  by  insurance. 

If  a  company  could  be  found  willing  to  insure  against 
such  losses  the  cost  of  the  premium  would  undoubtedly 
be  permitted  by  the  Treasury  Department  as  an  allowable 
expense  and  this  fact  lends  considerable  force  to  the  argu- 
ment that  since  the  operator  is  required  to  carry  the  cost 
of  this  risk  himself,  he  should  be  allowed  to  deduct  the 
amount  necessary  to  provide  such  a  reserve,  but  the  f  ram- 
ers  of  the  revenue  laws  thus  far  have  not  yet  accepted 
such  a  viewpoint. 

During  the  time  when  the  Engineers '  Committee  of  the 
United  States  Fuel  Administration  was  giving  considera- 
tion to  coal  mining  costs  for  the  purpose  of  fixing  sales 
prices,  they  allowed  a  certain  amount  in  addition  to  the 
ascertained  cost  of  the  coal  to  cover  such  mining  hazards. 
In  the  report  of  the  Engineers'  Committee,  page  15,  re- 
ferring to  the  cost  forms,  we  find  the  following: 

"Contingent  funds  noted  on  the  blank  were  generally  omitted,  but 
in  a  few  cases,  especially  when  the  need  of  such  funds  had  recently 


140  BITUMINOUS  COAL  MINE  ACCOUNTING 

been  felt,  most  ample  allowances  were  made.  After  being  considered, 
it  was  decided  to  apply  in  each  district  amounts  obtained  by  studying 
the  claims  of  the  better  operators  of  such  district,  after  obtaining,  from 
the  best  available  sources,  reliable  figures  as  to  the  cost  of  lands  and 
amount  and  value  of  improvements  characteristic  of  the  district. 

"The  question  of  contingent  reserves  is  a  serious  one.  From  a  strict 
cost-accounting  standpoint,  no  cost  can  be  permitted  until  incurred. 
Nevertheless,  such  reserves  are  essential  to  an  industry  involving  the 
great  risk  incident  to  coal  mining,  and  with  the  full  knowledge  that 
such  reserves  are  used  only  for  major  accidents  or  calamities,  and  that 
ordinary  Losses  regularly  incurred  are  charged  to  the  costs  of  opera- 
tion, it  was  decided  to  include  a  small  amount  for  contingent  reserve 
in  the  general  allowance." 

The  need  for  a  contingent  reserve  is  dealt  with  at  con- 
siderable length  in  the  report  of  the  Cost  Accounting 
Committee  of  the  National  Coal  Association,  made  to  its 
Board  of  Directors  at  the  time  of  the  convention  in  May, 
1919,  as  follows : 

"In  the  case  of  permanent  enterprises,  the  funds  derived  from  charges 
to  operating  cost  to  cover  depreciation  and  depletion  are  to  replace 
plant  and  equipment  becoming  worn  out  or  obsolete;  but  in  coal  min- 
ing or  other  wasting  enterprises,  the  purpose  of  such  fund  is  to  replace 
and  redeem  the  capital  invested  in  the  wasting  assets,  and  such  duty  of 
redemption  fully  taxes  the  allowable  charges  for  depletion  and  depre- 
ciation. 

"As  a  general  rule,  the  buildings  and  major  items  of  plant  and  equip- 
ment placed  at  a  coal  mine  are  calculated  to  last,  with  proper  care  and 
repair,  do  last  the  life  of  the  mine,  and  therefore  obsolescence  of  coal 
mine  plant  and  equipment  results  more  often  from  accident  than  by 
installation  of  new  appliances.  Depletion  and  depreciation  are  items 
of  prime  cost  that  can  be  measured  with  reasonable  exactness  and  prop- 
erly provided  for  by  charges  to  current  expense  of  operation;  but  coal 
mining  is  a  hazardous  business,  and  in  some  regions  extra  hazardous, 
and  obsolescence  being  a  contingency,  common  prudence  dictates,  in 
order  to  avoid  possible  financial  embarrassment,  that  there  should  be 
periodically  reserved  and  built  up  from  net  income  sufB.cient  provision 
to  meet  any  probable  contingency.  Such  reserve  is  not  an  item  of  cur- 
rent cost,  and  therefore  not  deductible  in  determining  taxable  income, 
but  the  cost  upon  the  realization  of  the  contingency  is  a  proper  charge 
to  current  expense,  and  should  then  be  so  charged,  and  not  charged 
to  contingent  reserve. 


GENERAL  EXPENSES  141 

"The  increase  in  current  expense,  by  reason  of  such  happening,  will 
reduce  current  net  income,  and  therefore  a  corresponding  amount,  or  as 
much  thereof  as  may  be  possible,  should  be  transferred  from  con- 
tingent reserve  to  Profit  and  Loss. 

"The  general  conditions  existing,  and  the  experience  of  any  mine  or 
mining  region,  will  dictate  to  the  operator  the  necessary  provision  for 
contingencies. 

"Though  maintenance  expense  is  practically  a  constant  factor  of 
current  expense  in  coal  mining,  prudence  also  suggests  in  accordance 
with  the  peculiarities  of  each  case  the  segregation  from  income  of  a 
maintenance  reserve." 

The  ^'Uniform  Classification  of  Accounts  for  Anthra- 
cite Coal  Operators,"  under  the  caption  of  ^^Keserve  for 
Mining  Hazards, ' '  contains  the  following  instructions : 

"Credit  to  this  account  during  each  accounting  period  an  estimated 
amount  to  cover  mining  hazards. 

"Charge  this  account  and  credit  'Mining  Hazard  Claims  Determmed' 
with  the  amount  of  claims  which  have  been  determined  and  are 
payable. 

"Charge  this  account  also  with  the  expenses  of  reopening  areas  closed 
by  squeezes  and  caves,  mine  fires,  property  damaged  by  explosion, 
floods,  etc.,  damages  to  surface  and  stinictures  on  same,  including  cost 
of  property  acquired  in  settlement  of  damage  claims  in  excess  of  the 
value  of  such  property  for  the  purpose  for  which  it  will  be  used  and 
the  expenses  of  rehabilitating  property  damaged,  not  purchased.  Also, 
costs  of  relocating  and  building  roads  and  highways,  legal  and  court 
costs  incidental  to  property  and  personal  damage  claims  should  be 
charged  to  this  account. 

"The  rate  per  ton  may  be  increased  or  decreased  from  time  to  time 
in  order  to  keep  this  reserve  account  at  an  amount  representing  a  safe 
margin." 

The  descriptions  immediately  preceding  are  quite  spe- 
cific as  to  the  nature  of  the  hazards,  which  should  be  pro- 
vided for  through  the  establishment  of  such  funds. 

In  the  first  reports  prepared  by  the  Federal  Trade 
Commission,  consideration  was  given  to  this  item,  but  it 
was  eliminated  from  the  succeeding  cost  sheets.  The 
Federal  Trade  Commission  tried  for  a  considerable 
period  of  time  to  get  sufficient  data  as  to  the  cost,  spread 
over  a  number  of  years,  of  items  which  would  properly 


142  BITUMINOUS  COAL  MINE  ACCOUNTING 

become  chargeable  to  such  a  contingent  reserve  fund, 
that  they  might  reach  a  conclusion  as  to  a  proper  amount 
which  might  be  considered,  but  the  information  obtained 
on  the  subject  was  comparatively  meager. 

Although  the  item  may  be  one  not  properly  included 
in  coal  costs  (and  on  that  point  accountants  differ),  and 
may  not  be  deducted  as  a  portion  of  the  expense  of  opera- 
tion in  reporting  to  the  Treasury  Department,  prudence 
would  dictate  that  such  a  fund  be  established  in  most 
operations,  through  being  set  aside  as  segregated  surplus, 
ear-marked  for  the  particular  purpose  only  of  meeting 
such  contingencies  if  and  when  they  arise. 

Deferred  Expenses. — Maintenance  in  a  coal  mine  is 
practically  a  constantly  recurring  expense.  As  the  work- 
ings advance  there  is  a  continuous  need  for  more  steel 
rail,  more  copper  wire,  additional  mine  cars,  locomotives, 
etc.  In  addition  to  those  items  of  equipment  made  neces- 
sary by  the  advance  of  workings,  there  are  the  replace- 
ments of  similar  items  of  worn-out  equipment  to  be  taken 
care  of.  In  the  case  of  replacements  of  smaller  items 
involving  not  too  large  sums  of  money  the  cost  can  read- 
ily be  absorbed  in  the  operation  from  month  to  month 
without  any  appreciable  effect  on  the  general  level  of 
cost. 

The  purchase  of  additional  items  of  equipment  either 
for  the  purpose  of  keeping  step  with  advancing  workings 
or  replacements  of  worn-out  items  of  the  same  nature 
frequently  means  the  expenditure  of  very  considerable 
sums  of  money,  which,  if  permitted  to  go  against  the 
cost  for  a  single  month,  will  violently  distort  the  cost  for 
that  month  and  cause  a  peak  even  in  the  cumulative 
figures. 

While,  of  course,  these  items  can  readily  be  explained, 
many  mine  managers  prefer  not  to  disturb  the  general 
trend  of  costs  but  to  spread  the  cost  of  such  large  instal- 
lations over  a  period  of  time  measured  to  some  extent 
by  the  useful  life  of  the  equipment  or  at  least  by  such  a 


GENERAL  EXPENSES  143 

period  as  will  not,  through  its  cost  distribution,  distort 
so  violently  the  current  production  cost.  This  is  accom- 
plished through  charging  at  time  of  purchase  the  cost  of 
such  items  to  an  account  frequently  called  *  ^  Deferred  Ex- 
pense/' This  account  should  be  credited  from  month  to 
month  with  the  proportion  of  the  cost  of  the  item  pur- 
chased or  installed  which  it  is  desirable  to  charge  into 
current  cost  of  operation. 

It  is  essential  in  such  a  method  of  handling  that  this 
account  be  subject  to  ready  analysis  in  order  that  the 
monthly  charge  may  be  made  against  the  proper  division 
of  operating  expense  to  which  the  unit  would  have  been 
charged  had  its  cost  been  included  in  a  single  month's 
operating  cost.  Such  a  form  of  analysis  sheet  is  illus- 
trated in  Form  38.  Full  reference  is  given  to  purchase 
voucher  numbers,  name  of  the  person  from  whom  pur- 
chased and  the  description  of  the  equipment  purchased. 

The  illustration  is  chosen  from  a  company  whose  fiscal 
year  begins  April  1.  The  arrangement  of  the  form  should 
be  such  as  to  meet  the  conditions  of  each  company  with 
respect  to  its  fiscal  period.  The  amount  chargeable  to 
each  month's  cost  is  readily  ascertainable,  being  the  total 
of  the  items  shown  in  the  column  for  the  month  selected. 
The  balance  of  the  account  is  the  aggregate  of  the  totals 
of  the  future  period. 

Such  a  form  will  also  be  found  very  convenient  for  the 
purpose  of  distributing  such  accounts  as  Insurance  Paid 
in  Advance,  etc. 

Some  operators  prefer  to  set  up  from  month  to  month 
a  charge  for  maintenance,  carrying  the  credit  into  a  main- 
tenance reserve  and  as  replacements,  repairs  and  the 
purchase  of  additional  equipment,  made  necessary  be- 
cause of  advanced  workings,  become  necessary  to  make 
charges  for  such  items  to  the  reserve  account  in  order 
that  such  an  equalization  of  cost  may  be  maintained,  but 
the  writer  prefers  to  meet  such  extraordinary  expenses 
through  the  Deferred  Expense  account. 


144 


BITUMINOUS  COAL  MINE  ACCOUNTING 


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Special  Work  Authorizations. — As  a  general  propo- 
sition the  mine  superintendent  is  clothed  with  all  au- 
thority for  the  contracting  of  all  expenses  in  connection 
with  the  ordinary  and  regular  operation  of  the  mine. 


CSTIMATC  No... 


aCNIWAL  MANAQKR. 

DEAR  SIR:-I  WOULD  ASK  FOR  AUTHORITV  TO  DO  THE  FOLLOWING  WORK  AT „ 

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CHARGE  TO                                                                                                                                                              GENERAL  MANAGER. 

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Form  39. — Special  work  authorization. 

Many  companies  require  that  the  superintendent  obtain 
special  permission  prior  to  the  outlay  of  any  consider- 
able amount  of  money  for  general  repairs  and  improve- 
ments. In  such  cases  it  is  frequently  desirable  to  open 
a  special  account,  in  order  that  the  total  cost  of  such 
repairs  and  betterments  may  be  ascertained.    The  work 


146  BITUMINOUS  COAL  MINE  ACCOUNT  IN  O 

to  be  done  may  be  the  construction  or  rebuilding  of  some 
building  of  minor  importance,  such  as  a  blacksmith  shop, 
etc.,  the  painting  of  operating  buildings  or  dwellings,  the 
construction  of  concrete  foundations  for  engines  or  gene- 
rators, the  work  in  connection  of  which  may  be  spread 
over  a  considerable  period  of  time.  It  may  be  desirable 
to  accumulate  these  expenses  in  a  separate  account  until 
the  work  has  been  completed,  and  then  to  charge  them  otf 
through  the  Deferred  Expense  account  over  a  sufficient 
number  of  months,  that  the  general  level  of  costs  be  not 
materially  distorted.  This  method  of  handling  is  also 
convenient  to  obtain  the  total  value  of  a  structure  for  fire 
insurance  purposes,  or  in  connection  with  the  installation 
of  some  item  of  equipment  which  will  be  capitalized.  Of 
course  in  the  last  mentioned  case  when  the  authorization 
account  is  closed  it  will  be  to  a  proper  asset  account.  A 
simple  form  for  obtaining  such  authority  is  shown  in 
Form  39. 


CHAPTER  XIV 
SALES  STATISTICS 

The  Shipping  Report. — That  the  sales  statistics  of  a 
coal  mining  company  may  be  readily  prepared,  it  is  neces- 
sary that  uniformity  of  report  begin  with  the  shipment 
of  the  coal  from  the  mine.  For  this  purpose,  it  is  desir- 
able that  the  weighmaster,  or  whoever  is  charged  with  the 
duty  of  waybilling  and  shipping  the  coal,  make  a  daily 
report  to  the  general  office  which  will  show  full  informa- 
tion as  to  the  consignee,  destination,  routing,  initials  and 
number  of  the  car,  whether  it  is  a  hopper,  box  or  flat- 
bottom  gondola,  the  capacity  in  tons,  light  weight,  size 
or  grade  of  coal. 

Where  loading  facilities  are  such  as  to  permit  the  in- 
formation to  be  obtained,  the  form  should  also  show  the 
mine  weight  of  the  coal  dumped  into  each  individual  car. 
This  is  usually  possible  where  the  coal  is  loaded  by  grav- 
ity. It  may  be  that  coal  is  being  shipped  of  a  different 
grade  than  the  grade  on  which  the  miners'  wage  scale  is 
based,  but  under  any  condition  the  payroll  weight  should 
be  shown.  Statistics  kept  for  the  purpose  will  very 
quickly  produce  ratio  values  which  will  enable  the  ac- 
countants to  determine  whether  the  railroad  weight  re- 
ported is  in  accordance  with  the  mine  weight,  even  though 
the  coal  sold  may  be  of  a  different  size  than  the  payroll 
basis. 

When  shaker  or  other  mechanical  screens  are  employed 
and  where  the  coal  is  loaded  by  a  loading  boom,  it  is 
usually  impossible  to  obtain  this  detailed  information, 
the  only  check  being  at  the  end  of  the  day  or  at  a  period 
when  the  mine  stops  operation. 

Where  separate  offices  are  maintained  for  the  shipping 

147 


148 


BITUMINOUS  COAL  MINE  ACCOUNTING 


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8ALE8  STATISTICS  149 

department  and  the  accounting  department,  it  is  desirable 
that  the  report  of  shipments  be  manifolded  in  order  that 
both  the  accountant  and  the  shipper  may  have  full  infor- 
mation as  to  shipments.  A  copy  should  also  be  preserved 
at  the  mine  office  for  future  reference.  The  report  should 
show  information  with  respect  to  the  number  of  hours 
worked  and  lost  and  the  reason  for  closing  down  before 
the  end  of  the  regular  working  day.  This  information  is 
necessary  because  of  the  fact  that  some  leases  provide  for 
abatement  of  royalties  in  the  event  of  shutting  down  the 
mine  due  to  strikes,  failures  of  machinery,  etc.,  and  this 
report  becomes  a  valuable  permanent  record  for  that  pur- 
pose. 

A  cut  of  such  a  report  is  reproduced  in  Form  40.  Its 
full  size  is  17  x  11  in.  It  should  be  perforated  on  the  end 
for  the  purpose  of  binding.  Where  it  is  possible  to  ob- 
tain the  mine  weights  of  the  individual  cars  the  sheet 
should  be  totaled  daily,  all  partly  loaded  cars  added,  de- 
ductions being  made  for  the  part  loads  under  the  tipple 
at  the  beginning  of  operation  in  the  morning,  the  total 
thus  obtained  being  the  payroll  weight  for  each  day's 
operation. 

From  the  copy  of  the  report  to  the  shipping  or 
sales  department  the  notices  of  shipments  are  made,  post- 
ing being  made  to  the  shipment  record  to  indicate  to 
what  extent  the  contracts  have  been  filled,  etc. 

The  sales  department  record  should  show  complete  in- 
formation as  to  order  number  of  both  customer  and  seller, 
full  charge  and  shipping  instructions,  quantity  and  price, 
the  effective  date,  etc.,  etc. 

A  form  for  such  information  is  illustrated  in  Form  41. 
It  is  on  ledger  paper  of  good  weight  to  permit  frequent 
handling,  punched  for  filing  in  post  binder.  If  additional 
posting  space  is  needed  a  continuation  sheet  can  be  pro- 
cured, considerably  condensed  as  to  headings. 

These  data  may  very  conveniently  be  compiled  on  a 
card  system  similarly  ruled. 


150 


BITUMINOUS  COAL  MINE  ACCOUNTING 


Practically  all  coal  is  sold  upon  the  basis  of  railroad 
weights.  With  comparatively  few  exceptions,  the  weights 
are  ascertained  at  a  point  different  from  the  point  of 
shipment,  the  cars  being  weighed  on  railroad  track  scales 
by  railroad  weighmasters  situated  at  points  varying  from 


White  Oak  Coal  Company 

MACOONALO.  W.  VA. 


General  Office  Order  No. 

SALES           -           "        " 

PURCMAIERJ            ■•       " 

191  .._ 

CHAR< 

SHIP   1 
DESTII 

»K    TO 

'NATION                         .                                      •• 

OUTINa..     _  ,,  „ 

.?SS  O 

fi!fi«uer»»- 

rwis  ORnFP  FFFFmvF                                          let       and  fxpires                                      lai 

urn 

-" 

MITIM. 

«.-« 

E*»Ae. 

««««. 

MINI 

am 

INITWl 

«,-« 

mr ' 

»»«. 



Form  41. — Record  of  Coal  Shipped. 


one  to  300  miles  from  the  mine,  depending  upon  the  dis- 
trict from  which  the  coal  is  shipped  and  the  destination  of 
the  car.  Coal  consigned  to  tidewater  points  is  commonly 
weighed  only  at  the  time  of  dumping  into  vessel.  For 
this  reason  unavoidable  delays  occur  in  obtaining  tlie 
necessary  information  with  which  to  invoice  cars  to  cus- 
tomers. 


SALES  STATISTICS  151 

It  is  the  custom  of  the  railroad  companies  to  send 
weights  daily  to  the  shippers  on  weight  sheets  which  are 
either  the  original  or  carbon  copies  of  the  railroad  com- 
pany's records.  These  records  show  the  consignee  and 
destination,  car  number,  initial,  kind  of  coal,  kind  of  car 
and  should  show  the  gross,  tare  and  net  weights  as  ascer- 
tained by  the  railroad  company's  weighing.  The  tare 
weight  reported  by  the  railroad  company  is  usually  the 
stenciled  one. 

Upon  receipt  in  the  office  of  the  coal  company  of  the 
railroad  company's  report,  deduction  of  the  tare  from 
the  gross  weight  should  be  checked  with  a  view  to  deter- 
mine the  correctness  of  the  net  weight.  Errors  in  sub- 
traction are  very  frequent,  because  of  the  fact  that  these 
railroad  weights  are  usually  ascertained  in  considerable 
hurry  and  frequently  under  circumstances  which  do  not 
make  for  accuracy.  It  is,  therefore,  always  advisable  that 
the  deductions  be  proved  before  the  weights  are  entered 
on  the  shipping  report. 

The  next  step  is  to  transcribe  the  weights  from  the 
railroad  weight  sheets  to  the  shipping  report,  the  entry 
being  usually  in  hundredweights,  not  in  pounds.  The 
weight  should  be  placed  in  the  proper  column  as  repre- 
sented by  the  size  of  coal  loaded,  viz.,  lump,  egg,  mine- 
run,  slack,  or  whatever  it  may  be.  When  entering  such 
weights  the  tare  weight  as  shown  by  the  railroad  scale 
report  should  be  checked  by  the  entry  clerk  against  the 
light  weight  as  shown  by  the  report  of  shipments  and  any 
discrepancy  noted  made  the  subject  of  investigation 
through  correspondence  with  the  railroad  scale  office. 

In  case  the  information  then  obtained  is  not  sufficient 
to  clear  up  the  discrepancy,  it  should  be  pursued  through 
further  correspondence  with  the  car  accountant  or  super- 
intendent of  transportation  of  the  road  which  owns  the 
car,  where  information  can  always  be  obtained  as  to  the 
stenciled  light  weight  of  the  car. 

At  the  time  of  entering  the  weights  a  mental  compari- 


152 


BITUMIN0U8  COAL  MINE  ACCOUNTING 


son  should  also  be  made  between  the  railroad  net  weight 
and  the  mine  weight  of  the  coal  loaded  into  the  car.  Fre- 
quently very  marked  shortages  in  railroad  weights  may 
be  detected  in  this  manner. 

Reconsignment  of  Coal  in  Transit. — Because  of  em- 
bargoes and  for  other  reasons  it  not  infrequently  hap- 


DEAR  SIR:— 

rOLLOWS:— 
CONSIGNEE. 


THE  FOLLOWING  CARS  OF  COAL  ARE  NOW  ENROUTE  BILLED  AS 


RFSTINATION 

cniiTiNr; 



OATE    OF 

MINE 

OILUING    POINT 

W.  B. 

.NiT.AL. 

CAR 

GRADE 

KINDLY  DIVERT  SAME  TO  THE  FOLLOWING : 


DESTINATION. 
REMARKS 


IN    YOUR    REPLY 
PLEASE    REFER   TO 
OUR  Fiue 


YOURS  VERY  TRULY. 

OAK  COAL  CO. 


Form   42. — Diversion   Order. 


pens  that  coal  must  be  reconsigned  to  another  consignee 
after  it  has  left  the  mine.  Such  reconsignments  are  suffi- 
ciently frequent  as  to  warrant  in  many  cases  the  printing 
of  special  forms  to  transmit  to  the  railroad  officials,  the 
accounting  and  sales  departments,  as  well  as  to  the  branch 
offices,  if  any,  interested,  the  orders  for  and  information 
as  to  such  diversions.    The  illustration,  Form  42,  covers 


SALES  STATISTICS  153 

a  form  of  such  diversion  order.  It  should  be  made  with 
sufficient  carbon  copies  that  all  departments  interested 
may  be  fully  advised. 

In  the  arithmetical  proving  of  deduction  of  the  tare 
from  the  gross  weight  on  the  railroad  weight  sheet  very 
frequent  errors  are  found.  If  this  were  made  the  subject 
of  letter  correspondence  in  order  to  determine  which  of 
the  three  weights — gross,  tare  or  net — reported  is  incor- 
rect, the  work  would  sometimes  become  burdensome. 
This  work  can  be  greatly  simplified  by  the  printing  of  a 
small  form  through  the  use  of  which  the  information  may 
be  obtained  without  greaf  labor.  This  form  should  be 
made  in  duplicate,  a  copy  being  retained  until  such  a  time 
as  the  information  has  been  returned  by  the  railroad 
weighmaster. 

In  order  that  scale  sheets  may  not  be  held  out  of  the 
files  awaiting  the  return  of  such  information,  it  is  de- 
sirable that  a  rubber  stamp  impression  ^*  Transferred  to 
Supplementary  Scale  Sheef  be  placed  over  the  entry  on 
the  original  report  and  that  the  report  be  allowed  to  go 
to  the  files  and  the  carbon  copy  of  the  supplementary 
scale  sheet,  or  inquiry  addressed  to  the  railroad  weigh- 
master, be  retained  as  the  record  until  such  a  time  as  the 
correct  weight  has  been  returned.  Such  a  form  is  illus- 
trated herewith.    (See  Form  43.) 

A  frequent  examination  of  the  shipping  reports  is  nec- 
essary in  order  that  cars  may  not  be  held  open  without 
record  of  weight  an  undue  length  of  time.  Here  again 
the  matter  of  correspondence  with  the  railroad  weigh- 
master can  be  very  greatly  reduced  through  the  printing 
of  a  form  on  which  will  be  listed  the  data  with  respect 
to  the  shipment  of  certain  cars  for  which  railroad  weights 
have  not  been  received.  This  form  will  answer  in  all 
purposes  as  a  scale  sheet  and  may  serve  the  good  pur- 
pose also  of  calling  attention  of  the  railroad  weighmaster 
to  the  fact  that  he  has  failed  to  make  revenue  billing  at 


154 


BITUMINOUS  COAL  MINE  ACCOUNTING 


ii 


U 


I   «"_; 


u 


H 


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s 

z 
0 

z 


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8ALE8  STATISTICS  155 

the  same  time  lie  omitted  the  report  of  weights  to  the 
shipper/    (See  Form  44.) 

As  heretofore  indicated,  weights  may  not  be  received  in 
the  office  of  the  shipper  with  any  degree  of  promptness, 
dne  to  the  fact  that  coal  from  one  mine  may  travel  in 
different  directions  and  the  weights  be  ascertained  over 
any  one  of  a  dozen  scales.  At  the  end  of  any  month 
there  may  be  outstanding  coal  from  one  to  fifteen  or  more 
different  days,  depending  upon  the  geographical  location 
of  the  mine. 

It  is  usually  desirable  to  hold  the  shipping  records  open 
for  a  few  days  in  order  to  obtain  a  reasonable  percentage 
of  actual  weights  on  the  cars  shipped  during  the  latter 
days  of  the  month  and  in  most  districts  it  is  not  usually 
desirable  to  begin  closing  the  sales  record  until  probably 
the  5th  of  the  month — in  many  districts  even  the  10th  may 
be  too  early. 

Sufficient  weights  having  been  ascertained,  the  weight 
sheets  checked  and  weights  entered,  the  columns  on  the 
shipping  report  representing  the  various  sizes  should  be 
totaled  for  each  day  and  carried  to  a  recapitulation  sheet, 
by  which  the  monthly  totals  of  shipments  will  be  ascer- 
tained. 

The  Tonnage  Recapitulation. — The  recapitulation  of 
tonnage  as  compiled  from  the  shipping  record  of  weights 
posted  from  railroad  scale  sheets  may  be  made  on  a  sheet 
of  a  report  similar  to  the  Daily  Eeport  of  shipments  of 
which  it  is  a  recapitulation.  Form  45. 

The  work  will  be  expedited  considerably  if  a  properly 
ruled  and  printed  blank  be  prepared  for  this  purpose. 
Such  a  form  selected  from  a  company  producing  a  num- 
ber of  sizes  of  coal  is  illustrated.  It  provides  columns 
that  the  total  mine  (payroll)  weight  of  each  size  of  coal 
dumped  each  day  may  be  shown,  and  in  parallel  columns 
the  railroad  or  gangers'  weights  which  are  the  basis  of 

1  It  is  also  a  convenient  form  on  which  to  furnish  a  certificate  of  weight 
to  the  purchaser  who  may  request  such  a  record,  as  a  supporting  paper  in 
connection  with  a  claim  for  shortage,  etc. 


156 


BITUMINOUS  COAL  MINE  ACCOUNTING 


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SALE 8  STATISTICS  157 

sales.  The  totals  of  payroll  weights  will  balance  the  pay- 
roll and  coal  proof,  and  if  audited  carefully  will  check 
the  omission  of  any  cars  of  prepared  or  mine-run  coal 
from  the  shipping  report.  The  railroad  weight  columns 
will  balance  in  size  the  same  columns  on  the  sales  sheet. 

A  comparison  of  the  payroll  weights  with  the  railroad 
weights  of  prepared  sizes  will  show  the  proportion  of 
screenings  which  will  in  turn  be  checked  by  the  total  of 
such  sizes  shipped. 

Inventories. — A  number  of  cars  will  usually  be  found 
at  the  end  of  the  month  to  be  standing  open  on  the  daily 
report  of  shipments  without  weights.  The  full  record 
with  respect  to  these  cars  should  be  transcribed  to  a 
similar  sheet  headed  ^* Inventory — Coal  in  transit''  and 
be  so  accounted  for  in  the  recapitulation  at  estimated 
weights.  This  estimate  can  be  a  very  close  one,  because 
of  the  fact  that  usually  other  cars  of  a  similar  classifica- 
tion are  loaded  with  the  same  size  or  grade  of  coal  and, 
when  the  mine  weight  is  shown  in  comparison  it  is  easy 
to  reach  a  close  approximation  of  the  weight  for  the 
car  for  which  the  railroad  has  not  yet  reported. 

On  the  daily  report  where  such  a  car  appears  there 
should  be  stamped,  in  the  weight  column,  ^*  Carried  to 
inventory.''  These  inventory  sheets  should  be  filed  with 
the  reports  for  the  succeeding  month  so  that  when  a 
weight  report  sheet  is  received  after  the  day  of  monthly 
closing  covering  a  car  shipped  in  the  preceding  month, 
it  will  not  be  necessary  to  go  back  to  the  record  of  a  pre- 
ceding period  to  complete  the  accounting  record. 

In  making  the  monthly  recapitulation  of  tonnage 
shipped,  the  inventory  page  covering  cars  of  a  preceding 
month  will,  of  course,  be  listed  in  the  sales  as  actual  ship- 
ments, the  estimated  weights  of  the  coal  carried  to  inven- 
tory at  the  end  of  the  preceding  month  being  deducted 
from  the  recapitulation,  so  that  the  shipping  record  ton- 
nage will  contain  in  the  way  of  discrepancies  only  the 
difference  between  the  actual  and  estimated  weights  of 


158  BITUMINOUS  COAL  MINE  ACCOUNTING 

one  month's  inventory  coal,  each  month's  reversal  of  in- 
ventories ^^ washing''  all  prior  discrepancies. 

In  addition  to  the  shipment  of  coal  in  railroad  cars 
there  is  at  almost  all  mines  a  considerable  amount  of 
other  coal  which  must  be  taken  into  consideration  in  the 
accounting  so  that  all  of  the  production  may  be  accounted 
for.  This  is  made  up  of  coal  burned  under  boilers,  that 
sent  to  the  blacksmith  shop,  coal  wrecked  in  the  mine,  for 
which  the  miner  must  be  paid,  coal  sold  to  employees 
and  others  at  the  mine,  either  through  deduction  from  the 
payroll,  by  cash,  or  through  transfer  of  the  charge  to 
the  general  office  for  collection;  the  sale  of  coal  at  the 
tipple  for  railroad  locomotive  fuel,  etc.  There  should 
also  be  taken  into  consideration  the  estimated  weights 
of  any  part  loads  of  coal  remaining  under  the  tipple  on 
the  last  day  of  the  month.  This  last  mentioned  coal 
would,  of  course,  be  charged  to  ''Inventory — Coal  on 
hand,"  as  should  also  any  fully  loaded  cars  held  uncon- 
signed  on  the  sidetracks  of  the  operator. 

Production  of  the  nature  noted  in  the  preceding  para- 
graph is  usually  the  most  troublesome  to  account  for 
and  it  is  sometimes  desirable  that  a  supplementary  re- 
port of  coal  produced  be  prepared  and  sent  to  the  ac- 
counting department  at  the  close  of  the  month  to  sum- 
marize the  coal  of  this  nature.  Such  a  report  is  illus- 
trated in  Form  46.  This  report  may  conveniently  be 
combined  with  the  Coal  Proof  which  was  illustrated  on 
page  60,  the  full  size  of  the  sheet  being  17  x  22  in.,  the 
same  as  the  daily  report  of  shipments. 

The  Sales  Record. — The  invoicing  of  bituminous  coal 
to  the  customer  presents  some  phases  which  are  peculiar 
to  the  coal  industry  and  which  are  not  met  with  in  most 
lines  of  business.  In  other  industries  it  is  usually  pos- 
sible to  invoice  immediately  upon  the  shipment  from  the 
works  or  factory.  Coal,  however,  as  indicated  hereto- 
fore cannot  be  billed  until  the  railroad  weight  is  re- 
ceived. 


SALES  STATISTICS 


159 


SUPPLEMENTARY  REPORT  OF  COAL  PRODUCED  AT 

MINE. 

Month  of , 19.. 


CHARGE  TO 

No. 
Wa. 
tons 

Min. 
Wfht. 

Kind 
cVa, 

Run 
Mil. 

Slack 

W'i'h 

AMOUNT 

Boilers 

1 

1 

Blacksmith  Shop 

1 

1 

Wrecked   Coal 

1 

1 

1 

Total    Fuel— Cwt. 

1 

Tons:     To  b«  filled  in  by  Accounting 
Department 

Coked 

/Deducted  from  \ 
Pay    Roll    Coal                    V.      Pay-roll         ) 

/To  beCollected\ 
Cash    Sales                            VByThisOflice   / 

1 

1 

1 

of  General  Office 
(Collections  to  be  Made  by  Them)  List 

1 

1 

1 

1 

1 

1             1 

1             1 

Total    Local    Sales— Cwt. 

.R.   R.   Enrine  Coal— Cwt. 

i 

1             1 

Total   Local   Sales  and   Fuel— Cwt. 

1 

' 

1 

1             1 

TOTAL— TONS                                                       1 

1 

1 

1             1 

PART  LOADS  ON  HAND  AT  END  OF  MONTH 
Give  car   initial,   number,  kind  of  coal.     Estimate  weights  and  enter  in  iSroper  column. 

Initi.1 

Namber 

Kind  of  Car 

Mint 

Kind 

ot 
Coal 

s 

M 

R.M. 

Slack 

Cok. 

1 

1 

-      1 
1 

1 

1 

1 

I 

1 

1 
Bin  Coal                     1 

1 

Coke  on  Yard            1 

1 

'-                           1 

1 

1 

1 



J 

Form  46. — Supplementary  report  of  coal  produced. 


160  BITUMINOUS  COAL  MINE  ACCOUNTING 

The  choice  of  forms  upon  which  billing  is  to  be  made 
to  the  customer  is  a  matter  for  the  individual  judgment 
of  the  operator.  They  should  be  arranged,  however,  in 
such  a  way  as  to  afford  carbon  copies  of  the  invoice,  and 
be  so  filed  that  the  information  they  contain  may  be  read- 
ily accessible.  The  form  itself  should  provide,  in  addition 
to  spaces  for  the  name  and  address  of  the  buyer,  infor- 
mation as  to  the  destination  and  the  consignee,  if  the 
latter  is  other  than  the  purchaser.  It  is  well  that  the 
invoice  bear  a  register  number  and  where  the  customer 
desires  it,  the  buyer's  order  number  should  also  appear. 
Full  information  as  to  date  of  shipment,  car  initial  and 
'number,  kind  of  car  and  the  weight  of  the  coal  in  hun- 
dredweights should  be  shown. 

Until  a  few  years  ago  it  was  quite  a  common  practice 
of  coal  operators  to  have  their  invoice  forms  so  ruled 
that  many  different  grades  might  be  shown  in  parallel 
columns  on  the  same  invoice.  Experience  has  demon- 
strated that  as  a  general  rule  coal  shipped  from  a  par- 
ticular mine  to  one  consignee  is  usually  of  the  same  size 
or  grade,  and  with  that  in  view  invoices  have  in  recent 
years  been  considerably  simplified  through  providing  a 
separate  invoice  for  each  grade  of  coal  shipped. 

The  accounting  will  be  very  much  expedited  if  a  sepa- 
rate set  of  invoices  and  separate  sales  sheets  be  main- 
tained by  the  operator  for  each  mine  shipping  coal.  This 
will  avoid  many  hours  of  vexatious  analysis  which  is 
necessitated  by  including  coal  for  a  number  of  mines  on 
one  invoice  when  sales  realization  for  each  mine  is 
wanted.  The  invoice  should  contain  for  working  data 
information  as  to  delivered  price,  rate  of  freight  if  pre- 
paid, deductions  by  way  of  commissions,  etc.,  the  price 
at  the  mine,  and,  through  calculation,  the  net  amounts  for 
coal,  freight  and  commissions  should  appear. 

It  will  be  found  quite  convenient  if  a  sufficient  number 
of  carbon  copies  be  made  that  the  posting  may  be  made 
to  the  ledger  from  a  carbon  copy  of  the  invoice  itself. 


SALES  STATISTICS 


161 


A  very  simple  invoice  in  manifold  form  is  illustrated  in 
Form  47.  The  face  copy  is  in  size  8%  x  6  in.,  and  is  so 
printed  as  to  tear  off  without  disclosing  the  analysis  of 
coal,  freight,  commissions,  etc.  The  file  copies,  of  which 
there  are  two,  one  for  a  book  record  and  the  other  for 
posting,  are  in  size  8%  x  7  in.    Some  companies  prefer  to 


JOOO     POUND. 

OAK  OOAL  OOfflPANY 

• 

^.^^                Accounting  department 
RS^^                      MACDONALD.  W.  VA. 

• 

INVOICE  OF  BITUMINOUS  COAL 
PURCHASED  BY 

ADDRESS 

SHIPPED  TO                                                                                   INVOICE 
ADDRESS                                                                                        ORDER 

• 

"•-"•«-• 

• 

DATE 

PRO.  NO. 

CAR 

mrriAi. 

KIND 

L" 

# 

AOOn...  CMMCT 

F*  Sak.  D.p't 

"AMOUNT" 
DIVIOlO  *m 
rOLLOW*. 

eoAi. 

W.lMnbrtu 

«r«lbrtlu.ii..oic««..r. 

.fod«:.di..c<:.,d..K.«i 

■  il>.F«l 

-7 

ral  Child  Ubof  Act 
TE  OAK  COAL  CO 

r.«..HT 

• 

utM  tkal  tK* 

l»>l.c. 

.<Sq>l.lM.I9l 

, 

TONS  OF  2.000  POUNDS 

SIZE 

PRICE 

F.  O   B. 

AMOUNT 

WHITE  OAK 
•MOKKLES* 

, 

AddrtMjIl  rcmittancn  ud  communiutioni  to  the 

is  nrccsurr.  nin  to  Invoice  Number.  Or  Initial  and 
Number,  and  date  of  Shipment. 

•ITTIBMINT  OUI  ON   1>TH  or  MONTH 

>wiNS  aHipxa 

NT 

_ 

Form  47. — Coal  Invoice. 


make  the  invoices  direct  from  the  railroad  weight  sheet. 
The  invoice  is  then  checked  against  the  weight  shown 
upon  the  daily  report  of  shipments,  and  thus  a  three-way 
check  is  developed  as  to  the  accuracy  of  the  weight  en- 


162  BITUMINOUS  COAL  MINE  ACCOUNTING 

tered  on  both  the  invoice  and  the  report  of  shipments, 
since  the  entries  on  both  are  made  from  the  same  source 
(scale  sheet)  by  two  different  persons  or  at  different 
times. 

Customs  Invoices. — Since  a  considerable  tonnage  of 
bituminous  coal  is  shipped  to  Canadian  points,  it  may  be 
well  to  say  something  with  respect  to  the  certified  in- 
voices which  are  necessary  that  the  cars  may  pass  the 
Canadian  Customs  authorities.  These  invoices  are  neces- 
sarily made  separately  for  each  car  shipped,  since  each 
car  must  pass  upon  its  own  certificate. 

It  is  important  that  these  invoices  be  mailed  to  the 
proper  customs  official  promptly,  that  they  may  be  on 
hand  when  the  car  arrives  at  the  border,  in  order  to 
avoid  detention  with  consequent  demurrage.  For  this 
purpose  additional  sheets  may  be  added  to  the  invoice 
form  to  provide,  in  addition  to  the  customs  invoices,  the 
regular  invoice  to  the  customer.  The  certificate  on  the 
face  of  the  invoice  should  contain  information  substan- 
tially as  indicated  in  Form  48. 

I,  the  undersigned,  do  hereby  certify  as  follows  : 

(1)  That  I  am  the  Auditor  of  Coal  Company,  exporter  of  the  goods 
in  the  within  Invoice  mentioned  and  described  ; 

(2)  That  the  said  Invoice  is  in  all  respects  correct  and  true  ; 

(3)  That  the  said  Invoice  contains  a  true  and  full  statement,  showing  the 
price  actually  paid  or  to  be  paid  for  the  said  goods,  the  actual  quantity  thereof, 
and  all  charges  thereon  ; 

(4)  That  the  Invoice  also  exhibits  the  fair  market  value  of  the  said  goods  at 
the  time  and  place  of  their  direct  exportation  to  Canada,  and  as  when  sold  at 
the  same  time  and  place  in  like  quantity  and  condition  for  home  consumption, 
in  the  principal  markets  of  the  country  whence  exported  directly  to  Canada, 
without  any  discount  or  deduction  for  cash,  or  on  account  of  any  drawback  or 
bounty,  or  on  account  of  any  royalty  actually  payable  thereon,  or  payable 
thereon  when  sold  for  home  consumption,  but  not  payable  when  exported  or 
on  account  of  the  exportation  thereof,  or  for  any  special  consideration  what- 
soever. .     ,       .      ,        ^ 

(5)  That  no  different  Invoice  of  the  goods  mentioned  in  said  Invoice  has  been 
or  will  be  furnished  to  any  one  ;  and 

(6)  That  no  arrangement  or  understanding  affecting  the  purchase  price  of 
the  said  goods  has  been  or  will  be  made  or  entered  into  between  the  said  ex- 
porter and  purchaser,  or  by  any  one  on  behalf  of  either  of  them,  either  by  way 
of  discount,  rebate,  salary  compensation,  or  in  any  manner  whatsoever,  other 
than  as  shown  in  the  said  Invoice.  And  that  such  fair  market  value  is  not 
lower  than  the  wholesale  price  of  the  said  goods  at  the  said  time  and  place : 
and  that  in  the  case  of  new  or  unused  goods,  such  fair  market  value  is  not  less 
than  the  actual  cost  of  production  of  similar  goods  at  said  time  and  place,  plus 
a  reasonable  profit  thereon. 

Dated  at  )      ,«.       .       ^ 

(Signature) 


this  day  of )  Auditor. 


Per- 
FoBM  48. — Customs  Certification. 


SALES  STATISTICS  163 

Credit  Memo,  and  Allowances. — It  frequently  happens 
that  cars  shipped  to  one  consignee  are  diverted  in  transit 
to  another,  wrecked  or  confiscated  by  the  railroad  com- 
pany. This  sometimes  occurs  after  the  coal  has  been 
billed  to  the  first  consignee.  In  this  instance  it  becomes 
necessary,  of  course,  to  issue  a  credit  memorandum  to 
the  original  consignee  and  to  charge  the  coal  to  the  per- 
son who  actually  received  it.  This  may  be  done  through 
the  journal,  but  it  is  recommended  that  instead  of  using 
the  journal  for  this  purpose,  credit  memoranda  be  issued 
on  the  invoice  form  suitably  marked  to  indicate  that  they 
are  credit  memoranda  and  a  new  billing  issued  as  of  the 
same  date.  The  new  billing  will  take  its  place  on  the 
sales  sheet  with  the  current  invoices. 

The  credit  invoice  should  be  written  up  on  the  bottom 
of  the  sales  sheet  or  on  a  separate  sheet  for  that  purpose 
and  the  credit  totals  be  deducted  from  the  debit  in  order 
to  obtain  a  net  realization  f.  o.  b.  mines.  The  cars  being 
billed  at  the  same  weight,  of  course  there  is  no  adjustment 
in  tonnage  and  the  coal  sales  account  for  the  current 
month  will  absorb  the  difference,  either  debit  or  credit. 

In  the  event  of  allowances  being  made  with  respect  to 
price,  a  similar  line  of  action  should  be  followed,  a  credit 
memorandum  being  issued  and  the  entry  made  in  red  on 
the  sales  sheet,  deducted  as  above. 

If  the  correction  is  one  carrying  adjustment  in  the 
weight  of  a  particular  car,  either  debit  or  credit,  a  cor- 
responding tonnage  entry  will,  of  course,  need  to  be  made 
on  the  daily  report  of  shipments.  If  it  is  a  car  shipped 
during  the  current  month  the  correction  is  made  on  the 
shipping  report  for  the  day  of  shipment  against  the 
proper  car;  if  the  entry  is  one  affecting  a  car  shipped 
during  a  preceding  month  then  the  entry,  either  black 
(addition)  or  red  (deduction)  will  be  made  on  the  sheet 
inserted  in  the  file  for  the  current  month  representing 
the  coal  brought  forward  in  inventory. 

This  method  is  recommended  because  it  will,  through 


104 


BITUMINOUS  COAL  MINE  ACCOUNTING 
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SALES  STATISTICS  165 

one  single  form  of  accounting,  bring  together  all  of  the 
items  which  affect  in  any  way  the  tonnage  production 
or  sales  realization,  and  the  cumulative  figures  obtained 
from  the  sales  sheets  themselves  will  always  be  in  abso- 
lute agreement  with  the  revenue  accounts  of  coal  sales, 
thus  avoiding  any  adjustments  which  otherwise  become 
necessary  in  the  event  that  corrections  of  the  kind  men- 
tioned are  made  through  the  journal. 

The  Sales  Sheet. — In  order  that  sales  statistics  with 
respect  to  tonnage  and  average  realization  by  sizes  be 
readily  obtained,  the  invoice  should  be  written  up  on  a 
sales  sheet  so  arranged  as  to  show  that  information  con- 
cisely. The  data  provided  by  the  memorandum  form  on 
the  invoice  becomes  the  source  of  information  for  the 
entry  to  the  sales  sheet,  the  figures  of  sales  realization 
being  entered  in  net  amounts,  freight  and  commissions 
deducted.  The  total  of  the  amounts  extended  to  the 
ledger  columns  becomes  the  balancing  factor  for  the  con- 
trol account  of  the  postings  to  the  ledger  from  the  carbon 
copies  of  invoices.  The  arrangement  of  the  form  illus- 
trated in  Form  49  is  such  that  the  tons  of  each  size 
produced  and  the  average  realization  f.  o.  b.  mines  by 
size,  as  well  as  in  total,  can  readily  be  figured.  Columns 
are  provided  for  the  amount  of  prepaid  freight,  commis- 
sions, etc. 

Inventories. — Coal  in  transit  at  the  end  of  the  month 
for  which  weights  have  not  been  received  should  be  esti- 
mated and  changed  to  Inventory — Coal  in  Transit — at 
the  price  which  will  be  received  for  it  when  actually  in- 
voiced to  customers.  This  method  of  handling,  actual 
prices  being  used,  will  not  distort  the  general  average  of 
sales  from  month  to  month.  This  entry  should,  of  course, 
be  reversed  by  credit  to  the  same  account  at  the  begin- 
ning of  the  succeeding  month,  this  credit  being  entered 
in  red  ink  on  the  sales  sheet  when  by  deduction  it  be- 
comes a  debit  to  coal  sales  account. 

Coal  held  unconsigned  at   the  mines   or   part  loads 


16(i  BITUMINOUS  COAL  MINE  ACCOUNTING 

held  there  should  be  charged  to  Inventory — Coal  on 
Hand — at  the  average  cost  of  production  or  at  the  mar- 
ket price  in  the  event  the  market  is  lower  than  the  cost. 
This  inventory  should  be  reversed  as  indicated  for  the 
coal  in  transit. 

Where  coal  is  sent  to  the  stock  pile,  either  mine  run 
or  slack,  charge  should  be  made  to  the  stock  pile  at  a 
rate  per  ton  which  it  is  felt  reasonably  sure  can  be  re- 
covered at  the  time  when  the  coal  is  shipped  from  stor- 
age and  any  later  transaction  in  the  sale  of  coal  of  this 
nature  should  be  treated  as  a  separate  item. 

Boiler  Coal. — Coal  used  at  the  boilers  should  appear 
in  this  sales  sheet  as  an  invoice  charge  at  cost  of  pro- 
duction or  market  price  in  the  event  that  the  market 
price  is  lower  than  the  cost  of  production. 

It  will  be  seen  that  the  intention  of  the  method  recom- 
mended is  that  all  charges  and  credits  in  any  way  af- 
fecting sales  or  tonnage  be  handled  in  a  uniform  man- 
ner. The  net  sales  sheet  total  of  the  tons  invoiced,  by 
grades,  will  check  the  net  total  of  the  tons  as  shown 
by  the  recapitulation  of  the  daily  reports  of  shipments 
plus  a  supplementary  report  of  coal  produced  after  tak- 
ing into  consideration  the  tonnage  adjustments  on  in- 
ventories at  the  beginning  and  closing  of  the  period. 
Any  discrepancies  between  the  weights  will,  of  course,  be 
readily  subject  to  audit  by  checking  of  the  invoice  ton- 
nage reported  on  the  daily  report  of  shipment.  The 
forms  of  sales  sheet  adapted  to  the  smokeless  fields  is 
illustrated  herewith.  This  form  may  be  elaborated  to 
suit  any  mine  by  providing  additional  columns  so  headed 
as  to  designate  the  grade  of  coal  customarily  sold. 

The  Sales  Ledger. — Because  of  the  fact  that  the  bill- 
ing record  of  one  month's  shipments  cannot  be  closed 
until  a  considerable  portion  of  the  next  month  has 
elapsed,  it  is  desirable  that  the  ruling  of  the  sales  ledger 
be  arranged  to  permit  the  posting  of  two  months'  in- 
voices simultaneously.    This  is  necessary  because  of  the 


SALES  STATISTICS 


167 


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168  BITUMINOUIS  COAL  MINE  ACCOUNTING 

fact  that  invoices  for  the  current  month  will  need  to  be 
posted  before  the  tonnage  record  for  the  preceding 
month  has  been  completed.  By  having  a  ledger  page 
prepared  with  double  debits  and  double  credits  this  can 
readily  be  accomplished.  Such  a  ruling  will  be  found  on 
the  sheet  illustrated  in  Form  50. 


CHAPTEE  XV 

MISCELLANEOUS  PROFIT  AND  LOSS 
ACCOUNTS 

Sale  of  Explosives. — In  the  cost  sheet  prepared  by 
the  Cost  Accounting  Committee  of  the  National  Coal 
Association  the  option  is.  given  as  to  whether  the  profit 
or  loss  from  the  sale  of  explosives  and  smithing  shall 
be  treated  as  an  addition  to  or  deduction  from  the  mine 
operating  cost,  or  as  a  separate  item  of  profit  and  loss. 
In  some  few  sections  of  the  country  the  agreement  made 
between  the  operators  and  the  miners  provides  that  ex- 
plosives used  by  the  miner  in  the  production  of  coal 
shall  be  furnished  by  the  operator  at  a  certain  fixed 
price. 

This  price  is  in  some  instances  below  the  cost  of  the 
explosive  plus  the  handling.  In  such  instances  this  item 
may  properly  be  considered  as  a  portion  of  the  operat- 
ing cost  since  it  is  an  expense  imposed  by  the  wage  con- 
tract. This  does  not  refer  to  the  sale  of  explosives 
through  the  stores  or  merchandise  departments  of  the 
operation,  when  such  explosives  are  sold  merely  at  the 
current  market  price  and  aside  from  a  requirement  of  a 
wage  agreement  with  the  miners.  Under  these  condi- 
tions the  sales  should  be  treated  as  a  portion  of  the 
operation  of  the  store. 

Smithing. — ^While  provision  is  here  made  for  the 
handling  of  the  profit  or  loss  on  smithing  as  a  separate 
item,  in  general  practice  it  may  be  found  much  more  ad- 
vantageous to  ''melt''  the  smithing  by  credit  posting 
into  some  one  of  the  other  operating  accounts  in  which 
the  time  of  the  blacksmith,  who  may  be  at  one  time 

169 


170  BITUMINOUS  COAL  MINE  ACCOUNTING 

sharpening  picks  and  at  another  period  of  the  day  doing 
other  work,  may  be  charged.  Where  the  separate  ac- 
count is  maintained  the  time  of  the  blacksmith  should 
of  course  be  charged  to  **  smithing ''  and  the  credit  rep- 
resented by  the  charges  made  against  the  miners  for 
this  labor  performed  on  their  behalf  posted  to  the  credit 
of  this  smithing  account. 

Heat,  Light  and  Power. — This  account  should  take 
the  credits  for  heat,  light  and  electric  power  furnished  to 
miners^  dwellings,  stores,  and  if  such  current  is  sold  for 
use  in  houses  not  owned  by  the  mining  company,  to  them 
as  well;  and  in  the  case  of  power,  the  price  received  for 
current  sold  to  manufacturing  plants  or  any  other  in- 
dustry which  may  purchase  from  the  coal  operation. 
Against  the  account  should  be  charged  the  production 
cost  of  the  power  sold,  or  if  purchased  power  is  used, 
the  purchase  price  of  the  same,  and  in  addition  thereto 
the  cost  of  maintenance  of  the  power  lines  necessary  to 
carry  such  current  to  the  purchasers,  as  well  as  depre- 
ciation on  such  equipment,  etc. 

Dwellings  and  Farms. — It  is  necessary  that  accounts 
be  kept  to  show  the  profit  or  loss  due  to  the  ownership 
and  operation  of  dwellings.  In  almost  every  bituminous 
coal  operation  it  has  been  found  necessary  that  the  coal 
operator  construct  a  sufficient  number  of  dwellings  to 
properly  house  his  employees.  These  houses  are  rented 
at  a  very  low  rate  per  room.  The  rental  paid  in  many 
instances  covers  the  coal  supplied  to  the  occupant  for 
heating  purposes  as  well.  In  some  cases  electric  lights 
are  furnished  and  included  in  the  monthly  charges.  It 
is  necessary,  therefore,  in  order  that  the  true  showing 
may  be  made  of  the  profit  or  loss  on  houses  that  proper 
charges  be  made  against  the  dwelling  account  for  re- 
pairs, taxes,  insurance,  depreciation,  house  coal  and  for 
electric  lights  in  the  event  the  last  two  mentioned  items 
are  included  in  the  lump  sum  charged  for  the  use  of  the 
dwelling. 


PROFIT  AND  LOSS  ACCOUNTS  171 

Where  a  separate  charge  is  made  for  coal  it  is  fre- 
quently covered  by  the  wage  agreement  at  the  rate  which 
does  not  return  the  cost  of  production  to  the  owner. 
Under  such  conditions  the  difference  between  the  cost 
and  the  amount  received  for  it  should  be  charged  against 
the  rental  of  the  dwellings.  It  is  essential  also  that  a 
proper  charge  be  made  for  fire  insurance.  The  depre- 
ciation should  be  figured  against  this  particular  class  of 
property  and  charged  to  *^ Depreciation  of  Dwellings'' 
and  not  as  a  direct  charge  to  ^^Depreciation"  as  a  por- 
tion of  the  operating  expense. 

Several  instances  hav6  come  to  the  attention  of  the 
writer  in  which  the  miners  live  at  a  point  considerably 
distant  from  the  mines,  in  which  case  the  operating  com- 
pany pays  the  transportation  of  the  miners  to  and  from 
work.  In  an  instance  of  this  kind  the  cost  of  such  trans- 
portation is  properly  chargeable  to  the  mining  opera- 
tion and  should  not  go  against  the  cost  of  dwellings. 

In  many  cases,  in  order  to  obtain  a  workable  tract  of 
coal,  it  has  been  necessary  to  acquire  the  surface  as  well 
as  the  mineral,  this  involving  the  purchase  of  farms  and 
farm  houses.  In  these  instances  the  cost  of  repairs,  in- 
surance, etc.,  should  be  allocated  against  the  farm,  with 
due  credit  given  for  the  rental  received  for  the  use  of 
land  and  houses. 

Washer  Operations. — Where  coal  is  marketed  only 
after  being  washed  the  raw  coal  should  be  charged  to 
the  washery  at  the  cost  of  production  and  the  washery 
operations  treated  as  a  separate  department,  full  charge 
being  made  against  the  washery  for  labor,  supplies,  de- 
preciation, insurance,  etc.,  and  a  proper  proportion  of 
the  salary  of  the  superintendent  and  other  mine  staff  as 
well  as  for  the  selling,  administrative  and  general  ex- 
penses properly  chargeable  thereto. 

Coke  Plant. — ^Where  a  portion  of  the  product  of  a 
mining  plant  is  coked  the  coal  should  be  charged  to  the 
coke  ovens  at  cost.    All  additional  items  of  labor,  sup- 


172  BITUMINOUS  COAL  MINE  ACCOUNTING 

plies,  and  the  proper  proportion  of  the  administrative, 
sales  and  general  expenses  should  be  charged  against 
the  coking  operation — due  credit,  of  course,  being  given 
for  coke  sold. 


CHAPTER  XVI 
THE  STORE  DEPARTMENT 

Because  of  the  fact  that  mines  are  in  many  cases  lo- 
cated at  points  remote  from  markets,  the  practice  of 
operating,  in  connection  with  mining  operations,  a  store 
for  the  convenience  of  the  miners,  has  become  quite  gen- 
eral. These  stores  are  called  upon  to  furnish  the  miner 
with  practically  all  the  necessities  of  life,  and  are  fre- 
quently department  stores  on  a  smaller  scale.  Although 
usually  merely  a  side  issue  in  the  mining  company's 
affairs,  it  is  necessary  that  the  accounting  for  the  mer- 
chandise operations  be  conducted  in  a  way  which  will 
clearly  reflect  the  results  of  the  operation  from  month 
to  month  in  order  that  the  owner  may  know  whether 
these  stores  are  being  operated  at  a  profit  or  at  a  loss. 

As  in  almost  any  other  line  of  industry,  a  proper  ac- 
counting presupposes  a  correct  inventory  as  a  beginning 
point,  and  that  such  an  inventory  shall  be  taken  periodi- 
cally, certainly  not  less  frequently  than  once  a  year,  and 
preferably  at  three  or  six  months'  periods. 

It  is  the  custom  in  many  operations  to  issue  to  the 
employees  store  checks  or  script,  which  is  negotiable 
in  the  company  stores.  At  the  time  of  issue,  an  assign- 
ment of  this  portion  of  the  employee's  earnings  is  made 
and  this  script  becomes  a  charge  against  the  employee's 
account  and  is  deducted  in  the  semi-monthly  pay  settle- 
ment. Store  checks  are  drawn  in  comparatively  small 
denominations,  and,  although  there  is  always  the  cur- 
rent liability  for  the  amount  of  unused  script  outstand- 
ing, this  amount  is  comparatively  insignificant  when 
compared  with  the  volume  of  sales,  and  the  liability 
may  for  the  monthly  statement  be  ignored. 

173 


174  BITUMINOUS  COAL  MINE  ACCOUNTING 

Many  sales  are  on  the  cash  basis.  In  not  a  few  in- 
stances open  accounts  are  maintained  with  a  preferred 
class  of  customers. 

From  these  three  sources,  script,  cash  and  open  ac- 
counts, the  volume  of  the  monthly  sales  may  be  readily 
obtained,  and  this  record  is  the  basis  of  the  monthly  ac- 
counting for  the  purpose  of  ascertaining  profit  or  loss. 
The  amount  of  sales  having  been  determined,  it  is  neces- 
sary to  ascertain  the  cost  of  such  sales.  If  it  is  desired 
to  carry  cost  and  sales  comparisons  on  individual  sales, 
this  information  may  be  obtained  through  such  an  ac- 
counting record.  In  most  instances,  however,  such  rec- 
ords are  not  maintained  and  it  is  necessary  to  fix  some 
method  whereby  the  cost  may  be  estimated  from  the 
sales. 

A  little  study  of  the  comparison  of  the  cost  of  a  num- 
ber of  major  items  compared  with  the  selling  price  in 
each  class,  weighted  properly  in  proportion  to  the  gross 
amount  of  business  transacted,  will  give  a  ratio  of  sell- 
ing price  to  cost  corresponding  to  the  average  markup 
throughout  the  stock.  Assuming  the  markup  to  be  30 
per  cent,  the  cost  will  represent  100  and  the  selling  price 
130.  The  amount  of  sales  divided  by  this  figure  will 
give  the  cost  of  merchandise  sold.  If  from  the  gross 
sales  for  a  given  month  this  calculated  cost  be  deducted, 
we  have  the  gross  profit  on  sales. 

From  this  figure  should  be  deducted  the  current  ex- 
penses of  operation,  salaries,  rent,  heat,  light,  insurance, 
etc.,  the  remainder  being  the  net  profit  for  the  month. 
In  preparing  a  statement  of  the  results  of  conducting 
the  merchandise  department  it  is  desirable  that  figures 
be  produced  showing  the  percentage  of  profit  to  sales, 
the  percentage  of  expenses  to  sales,  etc. 

Along  with  such  a  statement  of  earnings  should  be 
carried  a  running  statement  of  stock.  Monthly  entries 
should  be  made  crediting  Merchandise  (stock)  and 
charging  Cost  of  Merchandise  Sold.     To  the  Merchan- 


THE  STORE  DEPARTMENT  175 

dise  account  should,  of  course,  be  charged  at  the  time 
of  payment  the  purchases  of  additional  stock.  The  mer- 
chandise account  will  thus  show  at  each  month's  account- 
ing period  the  book  inventory  of  the  merchandise  on 
hand.  Periodically  when  inventories  are  taken  the  dif- 
ference between  the  book  inventory  and  the  actual  in- 
ventory will  necessarily  be  written  off  to  the  account 
Cost  of  Merchandise  Sold. 

At  inventory  time  when  a  complete  inventory  has  dis- 
closed any  discrepancies  and  the  proper  entries  have 
been  made,  a  new  ratio  should  be  obtained  which  will, 
unless  there  is  some  radical  departure  in  the  rate  of 
markup  during  the  succeeding  period,  more  accurately 
reflect  the  relative  selling  price  as  compared  with  cost. 

It  may  be  thought  desirable  by  some  to  take  a  semi- 
annual inventory  and  without  adjusting  the  inventory 
account  change  the  ratio  of  selling  price  to  cost  to  a 
figure  which  applied  during  the  second  six  months  of 
the  year  will  absorb  any  errors  in  estimate  during  the 
first  six  months  period. 

In  taking  the  inventory  full  consideration  should  al- 
ways be  given  to  salability  of  product  and  the  inventory 
should  be  priced  by  the  generally  accepted  method  of 
pricing  inventories,  namely,  cost  or  market,  whichever  is 
lower,  and  in  the  application  of  this  rule  unsalable  goods 
should  be  ignored  or  reduced  to  merely  nominal  value. 
A  failure  to  follow  this  simple  rule  must  eventually  get 
the  owner  of  such  a  merchandise  department  in  serious 
financial  trouble. 

The  statement  herewith  reproduced  will,  in  a  concise 
form,  reflect  the  results  if  the  accounts  are  kept  in  the 
manner  indicated.  Separate  accounts  should  of  course 
be  kept  with  each  store  operated. 


176 


BITUMINOUS  COAL  MINE  ACCOUNTINO 


) 


Form  51. — Mebchandise  Operation  Statement  Blank 
STATEMENT  SHOWING  MERCHANDISE  OPERATIONS 

MONTH    OF   ,    1922 


AMOUNT 

Sales  this  month 

Deduct  cost  of  merchandise  sold 

Gross  profit  on  sales 

Add  miscellaneous  earnings 

TOTAL  EARNINGS 

CURRENT 
EXPENSES  ' 

'  Salaries 
Rent 

Heat  and  light 
Hauling 
Miscellaneous 
Insurance 
Taxes 
Bad  accounts 

DEDUCT  TOTAL  EXPENSES 

NET  PROFIT 

Percentage  of  profit  to  sales 
Percentage  expenses  to  sales 
Pay  roll  earnings 
Percentage  sales  to  P.  R.  earnings 
Ratio  sales  price  to  cost 

INVENTORY    (date) 
Add  purchases  this  month 
Add  purchases  previous  months 

Total  inventory  and  purchases  to  date 
Less  cost  of  merchandise  sold  to  date 

BOOK  INVENTORY  (date) 

Sales  and  earnings  to  date 
Less  cost  and  expenses  to  date 

1 

NET  PROFIT  TO  DATE 

CHAPTER  XVn 
INTEREST 

The  question  of  whether  interest  expense  should  be 
included  in  the  cost  of  production,  or  whether  interest 
on  an  investment  should  be  included  as  an  item  of  ex- 
pense has  been  the  subject  of  a  continuous  discussion 
among  accountants.  At  the  1921  meeting  of  the  Na- 
tional Association  of  Cost  Accountants  in  Cleveland,  the 
question  of  the  inclusion  of  interest  in  cost  was  made  the 
matter  of  discussion  at  a  full  session,  but  after  being 
considered  from  every  angle  no  conclusion  was  reached. 

As  indicated,  interest  is  of  two  kinds;  that  paid  for 
the  use  of  money  of  others,  and  that  set  up  by  some  on 
the  books  to  represent  a  return  for  the  capital  invested. 
In  the  opinion  of  the  writer,  interest  of  either  kind  has 
no  place  in  a  cost  statement,  but  of  course  the  amount  of 
interest  paid  will  need  to  be  taken  into  consideration  in 
fixing  the  selling  price.  If  it  is  argued  that  interest  on 
the  investment  should  be  included  in  cost,  the  difficulty 
immediately  arises  as  to  what  is  the  proper  rate  at  which 
it  should  be  charged.  In  the  case  of  some  public  service 
corporations  the  prices  have  been  fixed  at  a  rate  which 
will  return  6  per  cent  to  the  investor.  It  is  a  well  rec- 
ognized fact  that  this  method  of  guaranteeing  dividends 
destroys  initiative  on  the  part  of  management.  If  it  is 
assumed  that  6  per  cent  is  an  adequate  return,  to  whom 
do  the  earnings  above  that  rate  belong!  To  the  investor 
or  to  the  public  ?  If  there  is  any  good  argument  in  favor 
of  including  interest  in  cost,  the  rate  should  be  not  6 
per  cent,  but  a  rate  which  is  commensurate  with  the  risk 
of  the  operation.    In  the  case  of  a  coal  mine  this  rate 

177 


178  BITUMINOUS  COAL  MINE  ACCOUNTING 

would  necessarily  be  high.  The  further  difficulty  arises 
of  finding  a  point  of  separation  as  between  the  items 
which  should  bear  interest  chargeable  to  cost  and  those 
which  should  not.  If  interest  is  properly  chargeable  on 
the  plant  and  equipment,  why  not  on  the  inventories  and 
even  on  the  payroll  cost  of  unfinished  work! 

This  question  can  be  further  tested  by  the  example  of 
a  company  issuing  its  stock,  part  common  with  no  guar- 
anteed return,  and  part  preferred  at  8  per  cent,  re- 
deemable at  a  price  above  par.  In  this  case  what  is  the 
proper  rate  of  interest  return!  This  is  still  further 
complicated  if  the  same  company  issues  bonds  at  a  rate 
of  interest  possibly  as  low  as  5  per  cent.  Is  the  stock- 
holder's money  entitled  to  a  higher  rate  of  interest  than 
that  of  the  bond  holder! 

It  would  seem  ridiculous  to  assume  that  the  rate  of  re- 
turn should  be  6  per  cent,  have  that  amount  set  up  on 
the  books  and  then,  when  the  year  has  passed  and  the 
profit  and  loss  statement  is  secured,  find  that  the  actual 
result  of  operation  is  but  3  per  cent  on  the  investment 
because  that  is  all  that  was  earned  regardless  of  the 
fact  that  6  per  cent  was  charged  into  cost  as  the  mini- 
mum return  on  the  investment. 

The  handling  of  interest  on  the  investment  in  this 
manner  is  futile  for  the  reason  that  if  set  up  on  the 
books  as  cost  it  must  also  be  set  up  as  profit.  The  owner 
of  the  business  has  invested  as  a  stockholder  and  can- 
not be  a  creditor  in  his  own  business  at  the  same  time 
for  interest  earned  on  the  investment. 

It  is  interesting  to  examine  the  practice  of  various 
Government  agencies  with  respect  to  the  inclusion  of 
interest  in  cost.  The  Federal  Trade  Commission  has 
uniformly  taken  the  position  formerly  assumed  by  the 
Bureau  of  Corporations,  that  interest  should  not  be  so 
included.  In  the  conferences  which  took  place  among 
the  various  Government  agencies  at  the  beginning  of 
the  war  with  respect  to  the  determination  of  the  cost 


INTEREST  179 

of  production  on  cost-plus  contracts,  the  consensus  of 
opinion  among  accountants  was  that  interest  had  no 
place  in  cost  determination.  The  Federal  Trade  Com- 
mission, however,  recognizes  the  fact  that  for  statistical 
purposes  both  cost  and  interest  should  be  taken  into  con- 
sideration in  obtaining  figures  from  which  to  obtain  a 
selling  price. 

It  has  furthermore  been  the  practice  of  large  indus- 
trial institutions  generally  in  the  United  States  to  dis- 
regard interest  in  cost.  In  the  practical  application  to 
the  coal  industry,  a  great  difficulty  would  immediately 
arise  as  to  a  separation  between  interest  on  the  operat- 
ing plant  and  the  interest  on  the  bonds  or  other  obliga- 
tions necessitated  by  the  carrying  of  undeveloped  coal 
lands.  Not  infrequently  bonds  are  issued  to  take  care 
of  floating  indebtedness  of  a  mixed  character  and  it  is 
generally  impossible  to  make  an  equitable  separation 
between  two  classes  of  property  if  it  were  desirable  to 
allocate  such  interest  payments. 

In  the  figuring  of  bituminous  coal  costs  therefore,  the 
consensus  of  opinion  among  accountants  in  the  industry 
is  that  interest  expense  should  in  no  way  enter  into  the 
cost  of  production,  but  that  on  the  balance  sheet  and  in 
the  preparation  of  profit  and  loss  statements  it  should 
appear  merely  as  a  deduction  from  income.  Further- 
more, that  interest  on  the  investment  should  not  be  set 
up  on  the  books  or  taken  into  consideration  in  the  prepa- 
ration of  profit  and  loss  statements. 

In  the  accounting  practice  monthly  entries  should  be 
made  to  the  credit  of  Interest-Matured  for  the  interest 
accruing  during  the  accounting  period.  When  paid  these 
amounts  should  be  charged  to  this  account. 


;  CHAPTER  XVIII 

THE    VOUCHER    SYSTEM 

In  order  that  invoices  may  be  filed  in  a  systematic 
manner  and  that  they  may  be  readily  subject  to  exami- 
nation by  the  accountant  and  of  easy  reference,  it  is 
desirable  that  some  sort  of  a  voucher  system  be  used. 


WASHINGTON.  D.  C 


TnB  CattKBKOIAk  Natioral 

tS-IO  OF  WASHINGTON.  D.& 


PAY    TO    THC     ORDER    or    ^AVU    ■NDICATm    BCLOW.  IN    rULL    rAVMCMT    Of    ACCOUIfr    A*    SHOWN     ON     mVCRn    SIDC    OF    THIS    VOUCHCK 

$ 


NATIONAL  OOAL  ASSOCIATION 


VOID  IF  DETACHED 


H 
It! 

11 

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ii-. 

Ill 
Mi 


Form  52. — Voucher  Check. 


Entry  to  the  various  accounts  through  the  medium  of 
a  voucher  or  voucher  register  is  very  much  preferable 
to  the  method  of  posting  from  the  day  book,  journal,  or 
cash  book. 

This  method  of  handling  is  one  generally  understood, 
but  for  the  benefit   of  those   who   may  yet   not   have 

180 


THE  VOUCHER  SYSTEM 


181 


adopted  it  this  chapter  is  written.  It  presupposes  the 
setting  up  of  an  account  under  some  such  caption  as 
Accounts  Payable  or  Audited  Vouchers  Payable,  to 
which  shall  be  credited  all  amounts  for  which  disburse- 
ment is  made  by  check,  thus  avoiding  a  multiplicity  of 
accounts  which  would  be  brought  about  if  separate 
ledger  accounts  were  opened  with  each  payee. 

The  invoices  bearing  approval  as  to  receipt  of  ma- 
terial, price,  authority  of  purchase,  etc.,  are  listed  on  the 
voucher  and  distribution  made  to  the  proper  accounts — 


— 

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Form  53. — Accounts  Payable  Voucher. 

expense  or  capital.  A  very  great  saving  of  time  is  ef- 
fected if  the  vouchers  are  padded  in  such  form  as  to 
permit  the  details  of  the  voucher  check  to  be  written 
at  the  same  time  as  the  office  or  file  copy  of  this  record. 
The  invoices,  after  being  listed,  should  be  attached  by 
some  permanent  form  of  fastener  to  the  office  copy  and 
filed  in  a  suitable  file. 

Very  simple  forms  of  Accounts  Payable  voucher  and 
voucher  check  are  illustrated  by  Forms  52  and  53.  They 
are  made  in  triplicate,  the  first  sheet  of  bond  paper  of 
about  20  pounds  weight,  the  second  sheet  glazed  onion 
skin  and  the  third  the  voucher  check.  The  invoices  are 
attached  to  the  face  copy  which  goes  to  the  files.  Post- 
ings are  made  from  the  onion  skin  copy.     The  voucher 


182  BITUMINOUS  COAL  MINE  ACCOUNTING 

check  is  completed  and  after  entry  in  the  cash  book  is 
mailed  to  the  payee.  The  data  with  respect  to  the  ac- 
counts paid  are  of  course  in  the  inside  of  the  voucher 
check  as  folded,  leaving  the  proper  space  for  endorse- 
ments on  the  opposite  side  of  the  check  proper,  as  folded. 
This  check  is  so  arranged  as  to  be  adaptable  for  mailing 
in  window  envelopes. 

The  original  copy  of  the  office  voucher"  bears  proper 
spaces  to  indicate  by  whom  made,  and  to  carry  the  neces- 
sary approval  of  officers,  and  if  issued  on  verbal  au- 
thority, the  authority  of  the  person  under  whose  in- 
structions issued. 

Where  the  volume  of  payments  is  sufficient  to  war- 
rant it,  a  considerable  saving  of  time  in  posting  can  be 
effected  by  the  entering  of  such  vouchers  in  a  voucher 
register,  which  is  ruled  to  show  on  the  credit  side 
amounts  payable,  discount,  and  a  column  for  miscellane- 
ous credits. 

On  the  debit  side  are  provided  columns  for  such 
operating  and  inventory  accounts  as  are  most  active, 
columns  being  provided  for  the  detailed  posting  of  mis- 
cellaneous accounts.  The  total  of  the  Accounts  Payable 
as  accumulated  in  this  record  is  posted  to  the  proper 
account  in  the  general  ledger.  This  account  is  charged 
with  the  cash  disbursements  to  the  close  of  a  given 
month,  and  with  any  journal  entries  affecting  ^*  Accounts 
Payable,^'  the  balance  being  the  unpaid  accounts  pay- 
able. As  payments  are  made  proper  notation  should  be 
made  on  the  voucher  register  in  the  column  marked 
**Date  Paid.''  The  sum  of  the  unpaid  items  should  ag- 
gregate the  credit  balance  of  the  Accounts  Payable. 
Such  a  form  is  illustrated  in  Form  54. 

It  may  be  elaborated  by  the  addition  of  other  columns 
to  any  size  desired  as  the  experience  of  the  accountant 
may  indicate. 

Where  the  volume  of  payments  is  not  too  great,  it  may 
even  be  found  desirable  that  direct  postings  be  made 


TUE  VOUCHER  8Y8TEM 


183 


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184  BITUMINOUS  COAL  MINE  ACCOUNTING 

from  the  voucher  to  the  ledger  account  Accounts  Pay- 
able and  debit  entries  made  from  the  voucher  itself  in 
detail  to  the  other  accounts.  Under  these  conditions  a 
proper  check  should  be  made  upon  the  ledger  account 
itself  to  indicate  the  items  paid,  the  unchecked  items  rep- 
resenting in  the  aggregate  the  credit  balance  at  the  end 
of  a  period. 

This  direct  posting  gives  in  the  operating  and  other 
accounts  a  detailed  record  much  more  quickly  accessible 
than  even  through  the  medium  of  the  voucher  register, 
but  as  before  indicated  the  voucher  register  saves  the 
bookkeeper  a  great  deal  of  ledger  posting  and  through 
its  use  the  work  may  be  more  equally  distributed  by  per- 
mitting more  than  one  person  to  work  on  the  books.  In 
the  voucher  register  method,  of  course,  only  the  totals 
of  the  various  columns  are  posted.  When  the  cancelled 
voucher  check  comes  back  from  the  bank  it  may  be  filed 
with  the  voucher  which  it  pays,  or  as  some  prefer,  may 
be  filed  alphabetically  in  a  check  file  and  when  so  dis- 
posed of  becomes  an  index  of  the  payments  made  to  the 
various  payees. 

Journal.  Vouchers 

What  has  been  said  with  respect  to  the  filing  of  papers 
in  connection  with  Accounts  Payable  is  equally  applica- 
ble in  connection  with  the  journal.  Vouchers  should  be 
prepared  to  show  in  proper  form  the  full  details  as  to 
entries  of  this  nature  and  the  supporting  papers  should 
be  attached  by  the  use  of  some  permanent  fastener  to 
the  journal  voucher.  Here  again  the  use  of  a  carbon 
copy  will  be  found  advantageous,  the  original  being  al- 
lowed to  go  to  the  files  with  supporting  papers  and  the 
postings  made  from  the  carbon  copy.  These  vouchers 
being  numbered  consecutively  and  progressively  and 
postings  made  direct  from  the  voucher  to  the  ledger, 
avoid  the   necessity   for  keeping   a   journal   book,   the 


THE  TOUCH ER  SYSTEM 


185 


vouchers  answering  all  purposes  because  the  posting 
reference  being  direct  to  a  voucher  number  afford  a 
much  more  ready  access  to  the  original  entry  with  the 
supporting  papers  than  through  the  medium  of  the  old 
style  journal. 

In  the  analysis  of  accounts  and  in  the  building  up  of 
statements  where  reference  is  necessary  to  the  original 
papers  the  voucher  system  embracing  the  loose  leaf 
journal  will  materially  expedite  matters.  Such  a  form 
of  journal  voucher  is  illustrated  in  Form  55. 


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Form  55. — Journal  voucher  blank. 


These  vouchers  may  be  filed  in  an  ordinary  vertical 
file  or  are  so  arranged  that  by  proper  folding  they  may 
be  filed  in  the  ordinary  document  file.  The  carbon  copies 
are  arranged  for  file  in  post  binders,  the  size  and  punch- 
ing being  such  that  stock  binders  may  be  purchased  al- 
most anywhere  to  fit  them. 

To  take  care  of  the  miscellaneous  cash  transactions  at 
the  mine  offices  and  stores  a  running  account  should  be 
kept  with  each  such  unit.  The  entries  can  well  be  han- 
dled in  the  mine  office  through  a  multiple  column  cash 
book.  The  work  in  the  accounting  department  can  be 
considerably  expedited  by  having  a  report  form  pre- 
pared, on  which  the  cash  items  may  be  systematically 
reported. 


180 


BITUMINOUS  COAL  MINE  ACCOUNTING 


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THE  VOUCHER  SYSTEM  187 

Such  a  report  may  as  well  reach  the  bookkeeper  in 
such  shape  as  to  be  immediately  available  for  posting, 
by  having  the  petty  cash  report  made  up  on  a  journal 
voucher  form,  as  illustrated  in  Form  56. 

All  necessary  supporting  papers  should  be  attached, 
and  full  information  shown  on  the  form  in  the  space 
provided. 

It  will  be  found  convenient  to  have  prepared  a  form 
for  the  report  from  the  mine  office  of  miscellaneous 
transactions  which  require  the  preparation  of  journal 
entries.  Such  a  form  can  be  used  for  the  report  of  trans- 
fer of  supplies  and  equipment  from  one  mine  to  another ; 
for  the  report  of  miscellaneous  sales;  the  charges  for 
electric  current  sold  to  other  than  employees;  drayage; 
and  in  fact  any  charges  for  which  special  reports  have 
not  been  prepared. 

It  should  be  made  in  sufficient  copies  to  provide  a  per- 
manent record  in  the  general  office  accounting.  When 
issued  it  should  follow,  if  it  covers  supplies,  the  same 
course  as  to  approval  for  payment,  as  bills  from  outside 
sources. 

That  proper  record  be  made  it  is  well  that  it  be  issued 
in  triplicate.  The  original  should  go  to  the  purchasing 
agent  to  be  handled  as  other  bills  for  approval.  The 
duplicate  should  go  to  the  accounting  department  at  the 
end  of  the  month.  The  triplicate  should  be  held  at  the 
mine  office  as  a  permanent  record. 

Such  a  form  is  illustrated  in  Form  57. 

If  used  for  inter-company  transactions  it  may  be  de- 
sirable to  use  additional  copies  to  provide  supporting 
papers  for  separate  sets  of  books. 

To  insure  the  full  record  reaching  the  accountant  a 
monthly  statement  of  such  memoranda  issued  should  be 
sent  to  the  accounting  department  on  some  simple  form, 
such  as  the  one  illustrated  in  Form  58. 


188 


BITUMINOUS  COAL  MINE  ACCOUNTING 


THE  NEW  RIVER  COMPANY          wm«S?pink 

«*™                                                                       .-,                                    PUBCHftSINQAOBNT 

MI8CEI_I_ANEOU8    CHAROK8    REPORT              ACCOUNTINe  OCPT. 

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DEBIT/ 

(                                                                                                        M.N.|| 

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Form  57. — ^Miscellaneous  charge  report 


THE  VOUCHER  SYSTEM 


180 


RepoR  No.. 


Number  Reporta  Consecutively  and  ProgreHivelf. 
Do  Not  Begin  Nev  Series  when  Book  Is  Completed. 
Beghi  New  Book  with  Next  Number.  


G«acnlOf«e« 


PRICE  Correct,  F.O.B.  ISfiTr' 


Purchastos  Agent 


Material 

Received Mo 

Quality :— Quantity. 


:Day 


Charge 

To  be  used  as  follows: 


Mining 

$ 

Deadwork 

Ventilation ..' . 

Haulage     and 
Hoisting  .... 

Roi&oad    Car 
Loading    nnd 
YardExpenae 

Power  

Kepair.    to 

Buildinga  and 
Permanent 
Structures  . 

$- 

Mine  Office.... 

SuperiAt'nd'nce 
Engineering    .. 

. 

Dwelling    Re- 

CapiUl  Acc't.. 
Personal   Acc't 

General  Exp. 

FREIGHT  OR  EXPRESS 


fSHIPPER 


% 

\'^l^r 

\  Chargelconsignco 

s 

i ' 

p. 

< 

blank. 


190 


BITUMINOUS  COAL  MINE  ACCOUNTING 


NOTC     THK   I 


/o//Jf'jr-<.      f'/^  K  J  y' 


Form    58. — Monthly    statement   of    miscellaneous 
charge  reports  issued. 


CHAPTER  XIX 
THE  BALANCE  SHEET 

In  preparing  the  Balance  Sheet  some  prefer  to  state 
the  accounts  with  the  fixed  assets  first;  others  with  the 
assets  in  the  order  of  their  ready  liquidation.  The  writer 
prefers  the  latter  method  which  has  the  endorsement  of 
many  accountants.  The  Balance  Sheet  which  is  illus- 
trated in  Form  59  has  been  adapted  from  a  very  care- 
fully prepared  one  used  by  some  of  the  anthracite 
operators. 

The  suggested  accounts  can  be  complete  only  as  to 
general  classification  and  many  additional  or  subsidiary 
accounts  will  of  necessity  be  kept  to  show  the  details  of 
these  general  classifications.  This  need  is  more  fully  ex- 
plained in  the  description  of  the  accounts  which  follows. 

Balance  Sheet  Accounts — Assets. 

Current  Assets. 

Cash. 

Charge  to  this  account  money  received  in  the  form  of 
United  States  coin,  United  States  Treasury  and  Federal 
Bank  notes,  National  Bank  notes.  Cheques  or  drafts  pay- 
able on  demand  and  credits  to  bank  accounts. 

Credit  this  account  with  cash  disbursements,  by  coin, 
currency,  cheque,  and  bank  account  debits. 

Notes  Receivable — Customers. 

Charge  to  this  account  notes  receivable  from  customers 
which  are  payable  within  one  year  from  date. 

Credit  this  account  with  notes  collected,  discounted, 
charged  to   **  Reserve  for  Uncollectible   Accounts   and 

191 


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BITUMINOUS  COAL  MINE  ACCOUNTING 


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THE  BALANCE  SHEET 


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THE  BALANCE  SHEET  196 


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196  BITUMINOUS  COAL  MINE  ACCOUNTING 

Notes ^^  and  otherwise  disposed  of.    (See  Contingent  Lia- 
bilities.) 

Notes  Receivable — Affiliated  Companies, 

Charge  to  this  account  notes  receivable  from  subsidiary 
or  affiliated  companies. 

Credit  this  account  with  notes  collected,  discounted, 
charged  to  ^'Eeserve  for  Uncollectible  Accounts  and 
Notes''  and  otherwise  disposed  of.  (See  Contingent  Lia- 
bilities.) 

Accounts  Receivable — Ciistomers. 

Charge  to  this  account  all  amounts  due  the  company 
from  customers  other  than  notes  receivable. 

Credit  this  account  with  collections,  allowances,  dis- 
counts and  amounts  charged  to  *^ Reserve  for  Uncollect- 
ible Accounts  and  Notes.'' 

Accounts  Receivable — Affiliated  Companies, 

Charge  to  this  account  all  amounts  due  the  company 
from  subsidiary  or  affiliated  companies  other  than  notes 
or  amounts  representing  loans  and  investments. 

Credit  this  account  with  collections,  allowances,  dis- 
counts and  amounts  charged  to  ^^  Reserve  for  Uncollect- 
ible Accounts  and  Notes. ' ' 

Accounts  Receivable — Miscellaneous, 

Charge  to  this  account  all  amounts  due  from  miscel- 
laneous debtors  for  sales  of  scrap,  supplies,  services,  roy- 
alties, etc. 

Credit  this  account  with  collections,  allowances,  dis- 
counts and  amounts  charged  to  **  Reserve  for  Uncollect- 
ible Accounts  and  Notes." 

Payroll  Overdrafts. 

Charge  to  this  account  the  total  of  overdrawn  accounts 
of  employees  on  payrolls. 

Credit  this  account  with  credits  from  payroll  and  items 
transferred  from  mine  office  to  general  office  for  collec- 


THE  BALANCE  SHEET  197 

tion  at  whicli  time  debit  Accounts  Keceivable — Miscel- 
laneous. 

Accounts  Receivable — Merchandise  Department, 

Charge  this  account  with  the  balance  of  uncollected 
accounts  on  store  ledgers  at  close  of  each  month  and 
credit  Merchandise  Sales. 

Credit  this  account  at  beginning  of  each  month  with 
balances  and  charge  Merchandise  Sales,  less  any  amount 
transferred  to  Accounts  Eeceivable — Miscellaneous,  for 
collection  through  general  office  which  at  time  of  trans- 
fer are  credited  to  this  account. 

Interest  Receivable. 

Charge  to  this  account  the  interest  accrued  on  notes, 
accounts  receivable  and  investments  when  such  interest 
becomes  due. 

Credit  this  account  with  interest  received  and  amounts 
charged  to  ^'Eeserve  for  Uncollectible  Accounts  and 
Notes.'' 

Inventory — Coal, 

Charge  to  this  account  and  credit  ^*Coal  Sales"  ac- 
count the  value  of  coal  in  transit  or  unconsigned  at  end 
of  month. 

Inventory — Merchandise. 

Charge  this  account  with  all  merchandise  purchased 
by  the  Merchandise  Department  for  resale,  and  with  in- 
coming freight  and  drayage  on  same. 

Credit  this  account  goods  transferred  to  other  stores, 
and  with  the  estimated  cost  of  Merchandise  sold  or  used 
in  the  operation  of  the  mining  plant  or  store. 

Inventory — Materials  and  Supplies. 

Charge  to  this  account  the  cost  of  materials  and  sup- 
plies purchased  during  the  month,  and  inventory  adjust- 
ments. 


198  BITUMINOUS  COAL  MINE  ACCOUNTING 

Credit  this  account  with  the  cost  of  materials  and  sup- 
plies used  and  sold,  and  inventory  adjustments. 

Investments, 

If  any  investments  are  pledged  to  secure  liabilities,  the 
securities  pledged  should  be  so  indicated  on  the  balance 
sheet. 

United  States  Government  Obligations, 

Charge  to  this  account  the  total  cost  of  United  States 
Bonds,  Certificates  of  indebtedness  and  other,  obligations 
of  the  United  States  other  than  currency  and  open  ac- 
counts. 

Credit  this  account  with  the  book  value  of  obligations 
sold,  and  credit  or  charge  the  difference  between  the  book 
value  and  the  selling  price  to  **  Profit  or  Loss  on  Invest- 
ments'* under  ^^Miscellaneous  Income'*  or  *^ Deductions 
from  Income"  as  the  case  may  be.  A  separate  ledger  or 
subsidiary  ledger  account  should  be  kept  for  each  class 
of  these  investments. 

Bonds — Other  than  United  States  Government. 

Charge  to  this  account  the  cost  of  bonds  purchased 
other  than  bonds  of  this  company  or  subsidiary  com- 
panies. This  account  also  includes  bonds  of  states,  muni- 
cipalities and  foreign  governments. 

Credit  this  account  with  the  book  value  of  bonds  sold, 
and  credit  or  charge  the  difference  between  the  book  value 
and  the  selling  price  to  ''Profit  or  Loss  on  Investments" 
under  ** Miscellaneous  Income"  or  ** Deductions  from  In- 
come," as  the  case  may  be. 

Mortgages, 

Charge  to  this  account  money  loaned  which  is  secured 
by  mortgages  and  costs  of  mortgages  purchased. 

Credit  this  account  with  collections  and  the  book  value 
of  mortgages  if  sold.  If  sold  at  a  price  different  from  the 
book  value,  credit  or  debit  **  Profit  or  Loss  on  Invest- 


THE  BALANCE  SHEET  199 

ments''  under  *' Miscellaneous  Income''  or  ** Deductions 
from  Income/'  as  the  case  may  be,  with  the  amount  of 
the  difference. 

Long  Term  Notes, 

Charge  to  this  account  notes  receivable  due  after  one 
year  from  date. 

Credit  this  account  with  collections,  notes  discounted, 
and  amounts  charged  to  *^  Reserve  for  Uncollectible  Ac- 
counts and  Notes. ' '    ( See  Contingent  Liabilities. ) 

Stocks  of  Other  Companies. 

Charge  to  this  account  the  cost  of  stock  of  other  com- 
panies purchased,  except  subsidiary  or  affiliated  com- 
panies. 

Credit  this  account  with  the  book  value  of  stock  sold. 
If  sold  at  a  price  different  from  the  book  value,  credit  or 
debit  *' Profit  or  Loss  on  Investments"  under  ^^Miscel- 
laneous Income"  or  *' Deductions  from  Income,"  as  the 
case  may  be,  with  the  amount  of  the  difference. 

Loans — Affiliated  Compames. 

Charge  to  this  account  amounts  loaned  to  subsidiary 
or  affiliated  companies  on  open  account. 

Credit  this  account  with  collections. 

Stocks  and  Bonds — Affiliated  Companies, 

Charge  to  this  account  the  cost  of  stocks  and  bonds  of 
affiliated  or  subsidiary  companies. 

Credit  this  account  with  the  book  value  of  stocks  and 
bonds  sold,  and  credit  or  charge  the  difference  between 
the  book  value  and  the  selling  price  to  *^  Profit  or  Loss 
on  Investments"  under  ^* Miscellaneous  Income"  or  ** De- 
ductions from  Income, ' '  as  the  case  may  be. 

Reserve  and  Sinking  Funds, 

Charge  to  accounts  under  this  caption,  the  assets  set 
aside  or  purchased  for  Reserve  or  Sinking  Funds.  A 
sub-account  should  be  provided  for  each  fund  for  which 


200  BITUMINOUS  COAL  MINE  ACCOUNTING 

there  is  a  separate  purpose,  such  as  ^'Insurance  Fund,'' 
^'Bond  Eedemption  Fund,"  ^'Preferred  Stock  Kedemp- 
tion  Fund, ' '  etc. 

Fixed  Assets. 

Coal  Reserves  Undeveloped.     .  . 

Charge  to  this  account  the  value  of  coal  undeveloped  or 
that  which  it  is  estimated  will  not  be  mined  within  45 
years  from  present  workings.  This  account  will  under 
no  circumstances  be  subject  to  depletion.  If  at  any  time 
a  portion  of  the  coal  reserves  are  within  45  years  of  be- 
ing worked,  that  portion  may  then  be  transferred  to 
*'Coal  Lands"  and  become  subject  to  depletion. 

Coal  Lands — Fee. 

Charge  to  this  account  the  cost  of  available  coal  lands 
minable  within  45  years  if  purchased  subsequent  to  Feb- 
ruary 28,  1913,  or  at  a  fair  market  value  as  at  March 
1,  1913,  if  purchased  prior  to  that  date. 

Credit  this  account  with  the  value  of  coal  lands  sold. 
If  the  selling  price  differs  from  the  book  value,  credit  or 
debit  the  diiference  to  * 'Profit  or  Loss  on  Sale  of  Coal 
Land"  under  '* Miscellaneous  Income"  or  '^ Deductions 
from  Income,"  as  the  case  may  be.  In  calculating  the 
profit  or  loss  on  the  sale  of  coal  lands,  consideration  must 
be  given  to  the  amount  of  the  depletion  reserved  and  sur- 
plus arising  from  revaluation  at  March  1,  1913,  applicable 
to  the  land  sold. 

Depletion  should  not  be  credited  to  this  account  but  to 
account  '^Eeserve  for  Depletion  of  Coal  Lands — Fee." 

Coal  Lands — Leaseholds. 

Charge  to  this  account  the  operator's  equity  in  the  fair 
market  value  of  leaseholds,  of  coal  lands  as  at  March  1, 
1913,  if  leased  prior  to  that  date,  or  at  cost  if  acquired 
subsequently. 


i 


THE  BALANCE  SHEET  201 

Mine  Plant  and  Equipment. 

Charge  to  this  account  the  cost  of  Mine  Buildings  and 
structures,  machinery,  equipment,  etc.,  purchased  or  con- 
structed subsequent  to  February  28,  1913,  or  at  the  fair 
market  value  as  at  March  1,  1913,  if  purchased  or  con- 
structed prior  to  that  date.  This  account  includes  tipples, 
power  houses,  office  buildings,  side  tracks,  reservoirs, 
steam  and  water  lines,  machinery  and  equipment,  mine 
cars,  motors,  steel  rail,  wiring,  and  all  equipment  neces- 
sary in  the  first  instance  to  bring  the  mine  into  an  operat- 
ing condition. 

After  the  mine  has  been  developed  to  its  regular  nor- 
mal output  capacity  all  additional  expenditures  for  minor 
items  of  plant  and  equipment,  necessary  to  maintain  but 
not  to  increase  production,  such  as  motors,  mules,  mine 
cars,  steel  rail,  copper  wire,  etc.,  should  be  charged  to 
operation. 

Should  these  normal  extensions,  additions  and  better- 
ments be  so  large  as  to  materially  distort  the  general 
average  of  cost  if  charged  to  one  mine's  operation  they 
should  be  charged  to  Deferred  Expense  and  distributed 
to  the  regular  expense  accounts,  over  a  reasonable 
period. 

Credit  this  account  with  the  book  value  of  such  units, 
scrapped,  sold,  dismantled  or  abandoned.  It  is  generally 
desirable  that  a  ^^ Plant''  ledger  be  opened  and  a  record 
kept  in  some  detail  of  the  items  of  such  property. 

Mine  Developments, 

Charge  to  this  account  the  cost  of  shafts,  slopes,  tunnels, 
canals,  ditches,  sump,  stable,  office,  hospital,  engine  and 
pump  rooms,  main  gangway,  etc.,  as  is  required  to  bring 
the  mine  into  a  regular  operating  condition,  if  such  ex- 
penditures were  made  subsequent  to  February  28,  1913. 
If  mine  developments  were  made  or  purchased  prior  to 
March  1,  1913,  they  should  be  shown  on  the  books  at  a 
fair  market  value  as  of  that  date.    All  normal  develop- 


202  BITUMINOUS  COAL  MINE  ACCOUNTING 

ments,  required  to  maintain  the  output,  such  as  gangways, 
airways,  chutes,  digging  up  rock,  grading,  ditching,  sec- 
ondary turnouts,  minor  tunnels,  airshafts  and  other  simi- 
lar mine  developments  should  be  charged  to  operating  ex- 
penses. Should  these  normal  developments  be  out  of 
proportion  to  the  regular  periodical  expenditures  for 
mine  developments  they  should  be  charged  to  an  account 
under  ^'Deferred  Expenses''  and  distributed  to  the  regu- 
lar expense  accounts  over  a  reasonable  period. 


Stripping  Expenses — Deferred. 

Charge  to  this  account  stripping  overburden  expenses 
which  are  not  applicable  to  the  coal  being  obtained  from 
stripping  operations  during  the  current  accounting 
period. 

Credit  this  account  with  a  portion  of  these  expenses  ap- 
plicable to  coal  being  obtained  by  stripping  operations 
during  the  current  accounting  period. 

The  portion  chargeable  to  each  ton  should  be  based  on 
the  estimated  amount  of  coal  to  be  realized  from  strip- 
ping operations. 

Improvements  and  Developments  in  Progress. 

Charge  to  this  account  all  improvements  and  develop- 
ments in  progress  which,  when  finished,  will  be  charged 
to  a  fixed  asset  account.  A  sub-account  for  each  par- 
ticular improvement  should  be  kept  under  this  heading 
until  such  improvement  or  development  is  completed, 
when  it  should  be  transferred  to  the  proper  fixed  asset 
account. 

All  improvements  and  developments  should  be  made 
under  Special  Work  Orders,  approved  by  the  proper 
ofiicers.  All  charges  for  work  done  under  these  orders 
should  be  charged  in  total  to  account  ^^Improvements 
and  Developments  in  Progress''  and  in  detail  to  each 
^^ Special  Work  Order." 


THE  BALANCE  SHEET  203 

The  ** Special  Work  Orders^'  should  be  numbered  con- 
secutively and  all  entries  chargeable  to  such  orders 
should  indicate  the  order  number  to  which  they  are  ap- 
plicable. 

Storage  Yards. 

Charge  to  this  account  the  cost  of  storage  yard  land, 
buildings,  machinery  and  equipment  if  purchased  or  con- 
structed subsequent  to  February  28,  1913,  or  at  a  fair 
market  value  as  of  March  1,  1913,  if  purchased  or  con- 
structed prior  to  that  date. 

Credit  this  account  with  the  book  value  of  storage  yard 
land,  buildings,  machinery,  etc.,  sold,  destroyed,  dis- 
mantled or  abandoned. 

Retail  Yards  (other  than  at  the  mine). 

Charge  to  this  account  the  cost  of  retail  yard  land, 
buildings,  machinery  and  equipment  (other  than  at  the 
mine)  if  purchased  or  constructed  subsequent  to  Febru- 
ary 28,  1913,  or  at  a  fair  market  value  as  of  March  1, 
1913,  if  purchased  or  constructed  prior  to  that  date. 

Credit  this  account  with  the  book  value  of  retail  yard 
land,  buildings,  machinery  and  equipment,  sold,  de- 
stroyed, dismantled  or  abandoned. 

Miscellaneous  Non-operatvng  Property. 

Charge  to  this  account  the  cost  of  miscellaneous  non- 
operating  property  if  purchased  or  constructed  subse- 
quent to  February  28,  1913,  or  at  a  fair  market  value  as 
of  March  1,  1913,  if  purchased  or  constructed  prior  to 
that  date. 

This  account  includes  the  investment  in  physical  prop- 
erty such  as  surface  land,  town  lots,  farm  lands,  timber 
lands,  farm  buildings,  farm  machinery  and  equipment, 
miners'  dwellings,  dwellings  not  occupied  by  miners, 
stores,  business  blocks,  parks  and  other  property  which  is 
entirely  distinct  from  and  not  used  in  connection  with  the 
mining  operations. 


204  BITUMINOUS  COAL  MINE  ACCOUNTING 

Sub-accounts  should  be  kept  under  this  heading  for 
each  class  of  property. 

Credit  this  account  with  the  book  value  of  property 
sold,  destroyed,  dismantled,  or  abandoned.  Credit  the  ac- 
count also  with  any  tract  or  panel  of  land  that  is  required 
in  mining  operations  and  charge  the  proper  operating 
asset  account. 

Defekred. 

Prepaid  Insurance. 

Charge  to  this  account  prepaid  insurance  premiums  not 
applicable  to  the  current  accounting  period. 

Credit  this  account  with  amount  charged  periodically  to 
the  different  insurance  expense  accounts.    . 

Advanced  Royalties, 

Charge  to  this  account  royalties  paid  in  advance  and 
credit  with  royalties  charged  royalty  expense  account, 
when  the  coal,  to  which  these  royalties  are  applicable,  is 
mined.  Charge  unrecoverable  advanced  royalties  to  ac- 
count * '  Royalty. ' ' 

Prepaid  Interest, 

Charge  to  this  account  prepaid  interest  on  notes,  ac- 
counts, etc.,  not  applicable  to  the  current  accounting 
period. 

Credit  this  account  with  such  interest  as  is  charged 
to  interest  account  during  the  current  accounting  period. 

Deferred  Expenses, 

Charge  to  sub-accounts  under  this  heading  all  expenses 
which  are  to  be  charged  to  future  periods  and  credit  with 
amounts  so  charged. 

This  account  should  include  only  such  expenses  as  large 
purchases  of  mine  cars,  etc.,  and  repairs  which  have  a 
continuing  value,  the  expense  of  which  will  be  distributed 
over  the  ensuing  year.     This  account  includes  all  addi- 


THE  BALANCE  SHEET  205 

tions,  extensions  and  improvements  which  do  not  add  to 
or  increase  the  output. 

No  charge  should  be  made  to  this  account  for  any  ex- 
pense or  loss  that  has  not  a  continuing  value  such  as 
losses  on  account  of  accidents,  fires  and  floods,  etc.,  the 
reserve  for  which  has  been  insufficient. 

Discount  on  Bonds  Sold. 

Charge  to  this  account  the  discount  on  bonds  sold  which 
is  chargeable  over  the  life  of  the  bonds. 

Credit  this  account  and  charge  ^  ^  Premium  and  Discount 
on  Bonds — Net''  with  the  amount  of  discount  applicable 
to  the  current  accounting  period. 

Prepaid  Taxes, 

Charge  to  this  account  the  taxes  prepaid  which  are  ap- 
plicable to  subsequent  accounting  periods. 

Credit  this  account  with  prepaid  taxes  applicable  to  the 
current  accounting  period  and  charge  the  various  tax 
expense  accounts. 

Interest  Receivable — Unmatured. 

Charge  to  this  account  monthly  the  interest  accrued  on 
notes,  accounts  receivable  and  investments. 

Credit  this  account  and  charge  ^^  Interest  Eeceivable'* 
with  the  amount  of  interest  receivable  which  becomes 
due. 

Balance  Sheet  Accounts — ^Liabilities. 

Current  Liabilities. 

Notes  Payable. 

Credit  to  this  account  notes  payable  issued,  except 
notes  of  affiliated  companies,  and  charge  with  notes  paid. 

Notes  Payable — Affiliated  Companies. 

Credit  to  this  account  notes  payable  due  subsidiary 
or  affiliated  companies  and  charge  with  notes  as  paid. 


206  BITUMINOUS  COAL  MINE  ACCOUNTING 

Accounts  Payable — Current, 

Credit  to  this  account  all  creditors'  and  other  accounts 
payable,  other  than  inter-company  accounts,  and  charge 
with  payments  made. 

Accounts  Payable — Affiliated  Companies, 

Credit  to  this  account  accounts  payable  due  subsidiary 
or  affiliated  companies  and  charge  with  payments  made. 

Payroll  Accrued, 

Credit  to  this  account  the  total  of  all  payrolls  for  each 
accounting  period.  Charge  this  account  with  salaries 
and  wages  paid. 

Interest — Matured, 

Credit  to  this  account  the  amounts  of  interest  on  in- 
terest bearing  indebtedness  which  matures  during  the 
current  accounting  period. 

Charge  this  account  with  amounts  of  matured  interest 
paid. 

Wages — Unclaimed. 

Credit  to  this  account  all  unclaimed  wages.  Charge 
this  account  with  unclaimed  wages  paid  or  credited  to 
income. 

Rents  Accrued, 

Credit  to  this  account  during  each  accounting  period  all 
accrued  rents  not  including  property  rented  on  a  royalty 
basis.    Charge  this  account  with  rents  paid. 

Dividends  Declared. 

Credit  to  this  account  dividends  declared.  Charge  it 
with  dividends  paid. 

Dividends — Unclaimed. 

Credit  to  this  account  all  unclaimed  dividends.  Charge 
the  account  with  unclaimed  dividends  paid. 


THE  BALANCE  SHEET  207 

Unclaimed  Bond  Interest  Coupons, 

Credit  to  this  account  all  unclaimed  interest  coupons. 
Charge  with  unclaimed  interest  coupons  paid. 

Defekred  Liabilities. 

If  any  deferred  liabilities  become  due  and  are  not  paid 
immediately,  the  amount  of  such  liabilities  due  and  un- 
paid should  be  shown  on  the  balance  sheet  as  current  lia- 
bilities. 

Taxes — Federal  Income  and  Excess  Profits, 

Credit  to  this  account  the  amount  of  Federal  Income 
and  Excess  Profits  Taxes  which  have  been  determined 
as  due  the  Government. 

Taxes  Accrued — General, 

Credit  to  this  account  during  each  accounting  period, 
the  State,  Local  and  Federal  Taxes  accrued,  other  than 
Federal  Income  and  Excess  Profits  Taxes. 

Charge  this  account  with  State,  Local  and  Federal 
Taxes  paid,  other  than  Federal  Income  and  Excess 
Profits  Taxes. 

Interest  Accrued — Unmatured. 

Credit  to  this  account  the  amount  of  interest  accrued 
on  interest  bearing  indebtedness  during  the  current  ac- 
counting period. 

Charge  this  account  and  credit  account  *' Interest  Ma- 
tured" with  amounts  of  unmatured  interest  when  such 
interest  matures  and  becomes  payable. 

Royalties  not  due. 

Credit  to  this  account  the  accrued  royalties  applicable 
to  each  accounting  period.  Charge  this  account  with 
royalties  paid. 

Liability  Insurance  Accrued, 

If  the  company  does  not  carry  its  own  liability  insur- 
ance, credit  this  account  with  the  amount  accrued  dur- 


208  BITUMINOUS  COAL  MINE  ACCOUNTING 

ing  each  accounting  period  based  on  the  payrolls. 
Charge  this  account  with  liability  insurance  premiums 
paid.  This  account  should  be  used  only  where  the  pre- 
paid premium  on  liability  insurance  has  expired  and  the 
company  becomes  liable  for  additional  premium. 

Compensation  Claims  Determined. 

Credit  to  this  account  and  charge  ^^Eeserve  for  Com- 
pensation Insurance"  the  amount  which  has  been  deter- 
mined* as  due  employees  as  compensation  for  injuries 
sustained  and  is  payable  in  some  future  period. 

Charge  this  account  with  payments  made  for  compen- 
sation. 

Mining  Hazards  Claims  Determined. 

Credit  to  this  account  and  charge  *^Eeserve  for  Min- 
ing Hazards'^  the  amount  of  claims  arising  from  prop- 
erty damaged  or  destroyed  by  squeezes,  explosions, 
water,  etc.,  the  amount  of  which  has  been  determined  as 
payable,  including  judgments  rendered  against  the  com- 
pany, etc. 

Charge  tliis  account  with  payments  made  on  account 
of  these  claims. 

Premium  on  Bonds. 

Credit  to  this  account  premiums  realized  from  sale  of 
bonds  when  originally  issued.  This  premium  should  be 
proportioned,  each  accounting  period  during  the  life  of 
the  Bonds,  to  account  *^  Premium  and  Discount  on  Bonds 
—Net.'' 

Eesekves. 

Reserve  for  Depletion  of  Coal  Lands — Fee. 

Credit  to  this  account  the  depletion  of  coal  land  owned 
in  fee,  applicable  to  the  current  accounting  period. 

Depletion  should  be  reserved  at  a  rate  per  ton  ascer- 
tained by  dividing  the  book  value  of  the  fee  coal  land 
by  the  total  estimated  tonnage  to  be  realized. 


THE  BALANCE  SHEET  209 

Reserve  for  Depletion  of  Coal  Lands — Leaseholds. 

Credit  to  this  account  the  depletion  of  leaseholds  of 
coal  lands,  applicable  to  the  current  accounting  period. 

Depletion  should  be  reserved  at  a  rate  per  ton  ascer- 
tained by  dividing  the  book  value  of  the  leaseholds  of 
coal  lands  by  the  total  estimated  tonnage  to  be  realized. 

Reserve  for  Depreciation  and  Obsolescence  of  Plant  and 

Equipment. 

Credit  to  this  account  the  estimated  amount  of  depre- 
ciation and  obsolescence  of  buildings  and  structures  for 
the  current  accounting  period.  ( See  article  on  Deprecia- 
tion, p.  119.) 

Amortisation  of  Mine  Developments. 

Credit  to  this  account  during  each  accounting  period 
a  portion  of  the  cost  of  mine  developments  applicable 
to  each  ton  of  coal  produced. 

The  rate  per  ton  to  be  amortized  should  be  ascertained 
by  dividing  the  estimated  amount  of  remaining  coal  ob- 
tainable into  the  book  value  of  the  developments.  It  is 
optional  whether  this  amount  be  treated  separately  or 
the  development  added  to  the  value  of  the  mineral  (fee 
or  leasehold)  and  recovered  by  depletion  changes. 

Reserve  for  Depreciation  and  Obsolescence  of  Storage 

Yards. 

Credit  to  this  account  the  estimated  amount  of  depre- 
ciation and  obsolescence  of  storage  .yards  and  storage 
yard  equipment  for  the  current  accounting  period. 

Charge  this  account  with  the  original  cost  (book 
value)  less  the  scrap  value  of  storage  yards,  buildings, 
machinery  and  equipment  destroyed,  dismantled  or 
abandoned. 

If  a  sufficient  amount  has  not  been  reserved  to  cover 
the  original  cost,  less  the  scrap  value  of  storage  yards 
destroyed,  dismantled  or  abandoned,  the  difference  be- 
tween the  original  cost,  less  the  scrap  value,  and  the 


210  BITUMINOUS  COAL  MINE  ACCOUNTING 

amount  reserved  for  depreciation  and  obsolescence 
should  be  charged  as  additional  depreciation  or  to  a 
special  *^  Profit  or  Loss  Account. '* 


Reserve  for  Depreciation  and   Obsolescence   of  Retail 

Yards  Buildings  and  Equipment. 

Credit  to  this  account  the  estimated  amount  of  depre- 
ciation and  obsolescence  of  retail  yards,  buildings  and 
equipment  for  the  current  accounting  period. 

Charge  this  account  with  the  original  cost  (book  value) 
less  the  scrap  value  of  retail  yards  buildings  and  equip- 
ment destroyed,  dismantled  or  abandoned. 

If  a  sufficient  amount  has  not  been  reserved  to  cover 
the  original  cost,  less  the  scrap  value,  of  retail  yards 
buildings  and  equipment  destroyed,  dismantled  or  aban- 
doned, the  difference  between  the  original  cost,  less  the 
scrap  value,  and  the  amount  reserved  for  depreciation 
and  obsolescence  should  be  charged  as  additional  depre- 
ciation or  to  a  special  ^* Profit  or  Loss  Account." 

Reserve  for  Depreciation  and  Obsolescence  of  Miscel- 
laneous Non-operating  Property. 

Credit  to  this  account  the  estimated  amount  of  depre- 
ciation and  obsolescence  of  miscellaneous  non-operating 
property  explained  under  '^Miscellaneous  Non-operating 
Property,*'  for  the  current  accounting  period. 

Charge  this  account  with  the  original  cost  (book  value) 
less  the  scrap  value  of  non-operating  property  destroyed, 
dismantled  or  abandoned. 

If  a  sufficient  amount  has  not  been  reserved  to  cover 
the  original  cost,  less  the  scrap  value  of  non-operating 
property  destroyed,  dismantled  or  abandoned,  the  differ- 
ence between  the  original  cost,  less  the  scrap  value,  and 
the  amount  reserved  for  depreciation  and  obsolescence 
should  be  charged  to  accounts  as  additional  deprecia- 
tion or  to  a  special  '^ Profit  or  Loss  Account." 


THE  BALANCE  SHEET  211 

Reserve  for  General  Insurance. 

Credit  to  this  account  during  each  accounting  period 
the  amount  determined  upon  by  the  company  as  suffi- 
cient to  cover  its  insurable  risks  if  the  company  carries 
its  own  insurance. 

Charge  this  account  with  the  value  of  property  de- 
stroyed by  fire,  floods  or  other  insurable  accidents  be- 
yond the  control  of  the  company.  If  the  amount  of  the 
reserve  is  insufficient  to  cover  the  loss,  the  difference 
between  the  loss  and  the  amounts  reser\^ed  should  be 
charged  to  an  account  properly  designated  '*  Profit  and 
Loss''  account. 

Reserve  for  Compensation  Insurance, 

Credit  to  this  account  during  each  accounting  period 
the  amount  determined  upon  by  the  company  as  suffi- 
cient to  cover  compensation  to  be  paid  employees  on  ac- 
count of  accidents. 

Charge  this  account  and  credit  **  Compensation 
Claims  Determined'*  with  amounts  of  compensation  that 
have  been  determined.  Also,  charge  it  with  all  expenses 
incurred  in  connection  with  accidents  such  as  doctors' 
fees,  hospital  expenses,  etc. 

Any  adjustments  of  amounts  credited  to  ^*  Compensa- 
tion Claims  Determined*'  should  be  credited  or  debited 
to  this  account. 

Reserve  for  Mining  Hazards, 

Credit  to  this  account  during  each  accounting  period 
an  estimated  amount  to  cover  mining  hazards. 

Charge  this  account  and  credit  ^'Mining  Hazards 
Claims  Determined"  with  the  amount  of  claims  which 
have  been  determined  and  are  payable. 

Charge  this  account  also  with  the  expenses  of  re- 
opening areas  closed  by  squeezes  and  caves,  mine  fires, 
property  damaged  by  explosions,  floods,  etc.,  damages 
to  surface  and  structures  on  same,  including  cost  of 
property  acquired  in  settlement  of  damage  claims  in  ex- 


212  BITUMINOUS  COAL  MINE  ACCOUNTINO 

cess  of  the  value  of  such  property  for  the  purpose  for 
which  it  will  be  used  and  the  expenses  of  rehabilitating 
property  damaged,  not  purchased.  Also,  costs  of  re- 
locating and  building  roads  and  highways,  legal  and 
court  costs  incidental  to  property  and  personal  damage 
ela^ims  should  be  charged  to  this  account. 

The  rate  per  ton  may  be  increased  or  decreased  from 
time  to  time  in  order  to  keep  this  reserve  account  at  an 
amount  representing  a  safe  margin. 

Reserve  for  Uncollectible  Accounts  and  Notes. 

Credit  to  this  account  during  current  accounting 
period  an  estimated  amount  to  cover  losses  on  uncollect- 
ible accounts  and  notes. 

Charge  this  account  with  amount  of  accounts  and  notes 
which  become  worthless. 

It  is  recommended  that  this  reserve  be  based  on  a  per- 
centage of  the  sales,  as  shown  by  experience. 

Funded  Debt. 

Bonds  Authorized  and  Issued. 

Credit  this  account  with  bonds  (at  par)  authorized 
and  issued.    Charge  with  bonds  (at  par)  retired. 

Bonds  in  Treasury. 

Charge  to  this  account  the  total  of  bonds  (at  par) 
previously  authorized  and  issued  and  later  repurchased, 
crediting  or  debiting  the  discount  or  premium  to  the  cur- 
rent year'§  profit  and  loss  account.  When  calculating 
the  premium  or  discount  to  be  debited  or  credited  to  the 
profit  and  loss  account,  consideration  should  be  given  to 
the  amount  of  discount  or  premium  previously  charged 
off  or  amortized  if  the  company  issued  its  bonds  at  a 
discount  or  premium. 

Mortgages. 

Credit  this  account  with  the  total  amount  for  which 


THE  BALANCE  SHEET  213 

the  company  becomes  liable  on  mortgages.     Charge  it 
with  mortgages  paid. 

Capital  Stock. 

Common  Stock, 

Credit  this  account  with  all  common  stock  (at  par)  is- 
sued. Charge  the  account  with  all  common  stock  (at 
par)  retired.  Common  stock  repurchased  but  not  re- 
tired should  be  charged  to  *^  Common  Stock  in  Treas- 
ury. ' ' 

Common  StocJc — In  Treasury. 

Charge  to  this  account  the  par  value  of  common  stock 
repurchased  which  was  previously  sold  and  paid  for. 

If  this  stock  is  repurchased  at  a  premium  or  discount, 
credit  or  debit  the  premium  or  discount  to  surplus. 

This  account  should  be  shown  on  the  balance  sheet  as 
a  deduction  from  *' Common  Stock.'' 

Preferred  Stock. 

Credit  this  account  with  all  preferred  stock  (at  par) 
issued.  Charge  the  account  with  all  preferred  stock  (at 
par)  retired.  Preferred  stock  repurchased  but  not  re- 
tired should  be  charged  to  **  Preferred  Stock  in  Treas- 
ury. 

Preferred  Stock — In  Treasury. 

Charge  to  this  account  the  par  value  of  preferred  stock 
repurchased  and  which  was  previously  sold  and  paid  for. 

If  this  stock  is  repurchased  at  a  premium  or  discount, 
credit  or  debit  the  premium  or  discount  to  surplus. 

This  account  should  be  shown  on  the  balance  sheet  as 
a  deduction  from  ^'Preferred  Stock. 


M 


SUKPLUS. 

Sinking  Fund  Reserves. 

Credit  to  this  account  the  amount  of  sinking  fund  re- 
serves required  to  be  set  aside  out  of  surplus  or  earn- 


214  BITUMINOUS  COAL  MINE  ACCOUNT  IN  Q 

ings,  as  determined  upon  by  the  company  or  specified 
in  mortgages  or  other  agreements. 

Charge  to  this  account  and  credit  "Earned  Surplus '^ 
with  the  amount  of  sinking  fund  reserves  when  the  ob- 
jects for  which  the  reserves  have  been  set  aside  have 
ceased  to  exist,  for  example,  the  payment  of  bonds  and 
mortgages  or  the  retirement  of  preferred  stock,  etc. 

Surplus — Arising  from  a  Revaluation  of  Assets. 

Credit  to  this  account  the  difference  between  the  book 
values  of  assets  revalued  and  the  fair  market  value  of 
such  assets,  as  of  March  1,  1913. 

Sub-accounts  should  be  kept  for  unrealized  surplus 
arising  from  revaluation  of  assets  as  of  March  1,  1913, 
for  each  class  of  assets  revalued. 

Charge  this  account  with  the  portion  of  surplus  aris- 
ing from  a  revaluation  of  assets  as  it  is  realized  and 
credit  the  amount  to  Surplus  Earned  Prior  to  March  1, 
1913.  The  amount  to  be  transferred  periodically  is 
equal  to  the  difference  between  the  amount  of  deprecia- 
tion allowance  based  on  the  original  book  value  and  that 
based  on  the  appraised  value.  The  amount  so  trans- 
ferred does  not  constitute  taxable  income  and  should 
not  be  reported  as  such.  This  also  applies  to  the  reval- 
uation of  coal  lands  and  leaseholds,  and  to  the  amounts 
charged  as  depletion. 

The  balance  of  this  account  should  not  be  included 
with  the  other  surplus  when  calculating  the  invested 
capital  of  the  company,  as  it  becomes  invested  capital 
only  when  realized. 

Surplus  Earned  Prior  to  March  1,  1913. 

Credit  to  this  account  the  amount  of  surplus  earned 
prior  to  March  1,  1913,  including  the  amount  transferred 
periodically  from  surplus  arising  from  a  revaluation  of 
assets. 

Charge  this  account  with  dividends  paid  from,  and 
appropriations  of,  this  surplus. 


THE  BALANCE  SHEET  215 

Surplus  Earned  Subsequent  to  March  1, 1913. 

Credit  to  this  account  the  amount  of  surplus  earned 
subsequent  to  March  1,  1913. 

Charge  this  account  with  dividends  paid  from,  and 
appropriations  of,  this  surplus. 

Note. 

Contingent  Liabilities. 

Should  the  company  be  contingently  liable  for  notes 
receivable  included  in  '^ Notes  Receivable''  (Customers, 
affiliated  Companies  or  Long  Term)  which  have  been  dis- 
counted, endorsements,  guarantees,  etc.,  such  liability 
should  be  indicated  on  the  balance  sheet  as  a  footnote. 


INDEX 


Accounts  Payable    (see  vouchers) 

Affiliated   companies,   206 

Current,    206 
Accounts    Receivable 

Affiliated  companies,   196 

Customers,   196 

Merchandise  department,   197 

Miscellaneous,  196 
Adjustments,    163 
Advanced  Royalties,  204 
Advertising,    138 
Allowances,    163 

Should    be    made    through     sales 
register,    163 
Amortization 

Of  leaseholds,   107 

Treasury    Department  tables    for, 
112,   113 
Appreciation 

Realized  on  March  1,  1913,  valua- 
tion not  taxable,   105 

Realized     portion     of     is    earned 
surplus,   105 


B 


Balance  Sheets,   191,   192,   193,   194, 

195 
Boiler  Coal,  159,  166 
Bonds,   198 

Authorized  and  issued,   212 

In  treasury,  212 

Premium  on,  208 

Sold  as  discount,  205 

U.  S.  Government  obligations,  198 
Boss  Driver's  Report,  82 


Capital   Accounts 

Allowable  additions  to,  85 
Limitation    of    charges    in    devel- 
oped mines,   85 

Cases  cited  in  Maynard   Case,   9-16 

Cash,   191 

Certificate   of    Weight,    154 

Check  Numbers,   56 

Check   Sheet,  59 

Claire  Furnace  Co.  Case,  6 

Coal  Proof.  60 


217 


Coal  Reserves   Fee,  200 
Coal  Reserves  Leasehold,  200 
Coal   Reserves  Undeveloped,   200 
Coke    Plant,    171 
Commissions,    138 
Common  Stock,   213 

In  treasury,  213 
Compensation     Claims    Determined, 

208 
Conducting  Transportation,  51 
Contingencies,  Reserve  for,  139 

Recommendation   of   Fuel   Admin- 
istration,  139 
Contingent  Liability,  215 
Cost  Sheets 

Daily,  80 

Federal  Trade  Commission,   18-39 

Idle  Day,  82 

National  Coal  Association,  40,  41, 
44,   48 

Standard,   81 
Credit  Memoranda,  163 
Customs  Invoices,  162 


Daily  Cost  Sheets,  80 
Day  Labor,  62 
Dead   Work,   49 
Defined,  66 

Federal    Trade    Commission    rule 
not  workable,  67 
Deferred  Accounts,  204 
Deferred  Expense,  142,  204 

Distribution  of,  144 
Deferred  Liabilities,  207 
Depletion 

Accounting  for,  99 
Comment   of    Engineers'   Commit- 
tee on,  2 
Regulations  respecting,  99,  105 
Reserve  for,  208,  209,  210 
Depreciation 

Comment    of   Engineers'   Commit- 
tee on,  2 
Effect  of  overtime,  134 
Figured    on    basis   of   tonnage    or 

depletion,  120,  126 
May  at  times  be  oflFset  by  repairs 

and  replacements,   123 
National    Coal    Association    Cost 
Report,  119 


218 


INDEX 


Depreciation 

Rate  should  be  consistent,  120 

Treasury  regulations,   121 
Development 

Accounting  for,  201 

When  it  should  be  capitalized,  85 
Discount  on  bonds,  205 
Diversion  of  shipments,  152 
Dividends   declared,   206 
Dividends  Unclaimed,  206 
Domestic  Coal,  61 

Report  form  for,   159 
Drainage,  50 
Driver's  Reports,  82 
Dumping  and  Tallying,  51 
Dwellings — rent  of,   170 

Depreciation  on,  171 


E 


Employees'  earnings,   78 
Employee's  pay  statement,  77 

Periodical  record  of,  78 
Employment  record,  78 
Employment  slips,   56 

When  class  of  occupation  changes, 
57 
Engineers'    Committee    U.    S.    Fuel 
Administration — Remarks  of,  2 
Equipment,    201 
Executive  salaries,  3 

Table   of,  3 
Explosives — Sale   of,    169 


Farms — rent  of,  170 
Federal     Trade     Commission     Cost 
Forms 
First  distributed  in   1917,  2 
Fourth,    1920,   enjoined   by  court, 

17 
Illustrated,  18-39 
Second  form,  1918,  basis  of  price 
revision    by    U.    S.    Fuel    Ad- 
ministration, 4 
Third,   1919,  not  put  into  use,  5 
Federal  Trade  Commission  declines 
to  endorse  National  Coal  Asso- 
ciation Cost  Sheet  Form,  42 
Feed,  83 

Filled  Orders,  150 
Fire  Insurance,  129 
Fuel 

Charges  at  "cost  or  market,"  91 
Charge  to  cost  necessary  for  com- 
parison with  other  mines,  92 
Comment    of    engineers'    commit- 
tee,  4 


Fuel 

Cost  may  be  distributed,  93 
Federal  Trade  Commission's  atti- 
tude regarding,  92 
Invoicing,  93 


G 


General  expense,  136 

H 

Haulage  and  hoisting,  50 
Hazards — mining,  139 
Heat,  sales  of,  170 
Hoskold's      formula      for      present 
value,    112 


I 


Improvements   and    Development   in 

Progress,  202 
Injunction    granted    Maynard    Coal 

Co,   17 
Insurance,  129 

Charges    for    premium    should    be 

distributed,   131 
Liability,   132 
On  life  of  officers,    133 
Prepaid,  204 
Interest 

Accrued,   207 

Federal  Trade  Commission's  atti- 
tude, 178 
Matured,  206 

National  Association  of  Cost  Ac- 
countants' position  on,  177 
Not  an  element  of  cost,  177 
Prepaid,   204 

Properly    a    deduction    from    in- 
come, 170 
Receivable,    197 
Receivable,  unmatured,  205 
Treatment  of,    177 
Inventories,    157,    165 
Coal,    197 

Material  and  Supplies,  197 
Merchandise,    175,    197 
Invested  capital 

Need   not   always   be    reduced   by 
charges    for    depreciation    prior 
to   1916  if  repairs  and  replace- 
ments   have    property    in    full 
productive   condition,    123 
Realized  appreciation  properly  in- 
cluded,  105 
Investments,   198 
Invoices,   161 

For  Canadian  Customs,  162 


INDEX 


219 


Journal    (see  vouchers) 


Leaseholds 

Coal  Lands,  200 

May    be    revalued    at    March    1, 

1913,  107 
May    have    considerable    non-tax- 
able value,  109 
Tables   for   finding  present  worth 

of,  112,   113 
Treasury     department,     question- 
naire regarding,   110 
Value  to  be  amortized,  108 
West      Va.      tax      commissioner's 
method  of  valuation,  114 
Legal    Expenses,    137 
Lever   Law,    1 
Liabilities,  Contingent,  215 
Liability  Insurance,   132 

Accrued,  207 
Light — sales  of,   170 
Live  Stock — care  of,  83 
Loans — Affiliated  Companies,   199 


M 


Maintenance  of  way,  50 
Maynard   Coal    Company   injunction 
suit,  6 
Justice  Bailey's  opinion  in,   6 
Merchandise    Department — Accounts 
for,   173 
Inventories,   175 
Statement  of  operations,   176 
Mine  plant  and  equipment,  201 
Mineral — depletion    of,    98,    105 

Revaluation  of  at  1913,  105 
Miners — given     check     number     for 

identification  of  coal,  54 
Mine  tonnage  record,  54 
Mining  Hazards 

Actual  losses  deductible,  142 
Anthracite      operators'      practice, 

141 
Claims    determined,    208 
Deductions   for   not  permitted   by 
the  Federal  Trade  Commission, 
141 
Not  deductible  in  returns  for  in- 
come taxes,   142 
Reserve  for,   139,  140 
Mining — National    Coal   Association 

cost  sheet,  43 
Mortgages,  212 


N 

National   Coal   Association 

Adopted  by  directors  as  stand- 
ard, 42 

Cost  sheet  forms,  44-48 

Cost  sheet  not  accepted  by  Federal 
Trade  Commission,  42 

Form  of  cost  sheet  first  sub- 
mitted to  Federal  Trade  Com- 
mission, 40-41 

Instructions  for  compiling  re- 
ports, 43 

Offers  cooperation  to  Federal 
Trade  Commission,  42 

Report  submitted  to  annual  con- 
vention, 1919,  42 
Xon-operating  Property,  203 
Notes  Payable 

Affiliated   companies,    205 

Current,  205 
Notes  Receivable 

Affiliated  companies,  196 

Customers,    191 

Long  term,   199 


Officers'    Salaries 

Amount  allowed  l)v  engineers,  3 
Orders  filled,  150 
Outside  Profits,  4 
Overdrafts — Payroll,   196 


Pay  Roll 

Illustrated,  71 

Overdrafts,    196 

Should   check  Coal,   Yardage  and 

Day  Work,  70 
Statement  of  earnings,  77 
Summary  of,   74 
Summary  to  carry  credit  accounts 

to  reduce  to  cash  basis  and  to 

balance  payroll,  75 
Summary  to  carry   miscellaneous 

non-mining  charges,   75 
To  show  deductions  to  bring  to  a 

cash  basis,  68 
Transfers       between       employee's 

numbers,  69,  71 
Petty  Cash — see  vouchers 
Plant   and   Equipment,   201 
Power  Cost 

Price     to     be     charged     for     coal 

burned,  91 
To  be  apportioned  to  various  sub- 
divisions of  cost,  52 
To  include  coal  used  at  boilers,  52 


220 


INDEX 


Power— Sale  of,  169 

Powers  of  Congress  in  intrastate 
business — Justice  Bailey's  de- 
cision,   12 

Preferred  Stock,  213 

Premium  on  bonds,  208 

Prepaid  Insurance,  204 

Prepaid  Interest,  204 

Prepaid  Taxes,  205 

Preparation,  51 

Present  Worth 

Hoskold's  Formula,  112 
Tables  used  by  Internal   Revenue 
Bureau,  112,  113 

R 

Railroad  Car  Loading,  51 
Railroad  Weight  Reports,  153 

Certificates  of,  154 

Requests  for,  154 
Reconsignments,  152 
Rent,   137 

Accrued,   206 
Repairs  to  buildings,  53 
Report  of  Shipments,  206 
Reserves 

Amortization  of  Development,  209 

Comment  of  engineers'  committee 
on,  2 

Compensation  Insurance,  211 

Contingencies,  140 

Depletion,  208 

Insurance — General,   211 

Mining  Hazards,  140 

Obsolescence,  208 

Sinking  Funds,  199 

Uncollectible  Accounts,  212 
Retail  Yards,  203 
Revaluations  at  March   1,   1913 

Treasury    Department    tables    for 
finding  present  worth,  112,  113 
Royalties,  95 

Advanced,  97,  204 

Form  of  report  for,  96 

Separate  miners'  checks  for,  96 

Unrecoverable — not  to  be  carried 
beyond  recoverable  period,  97 

S 

Salesmen's    Salaries    and    Expenses, 

137 
Sales  of  coal 
Sales    Sheets,    164 
Sales  Statistics,  147 
Selling  Expense,  137 
Shipper's  record  of  orders  filled,  150 
Railroad  weights,  basis  of,  150 


Sinking  Funds,  199 

Smithing,   How   to    handle    in   cost, 

169 
Special  Work  Authorizations,  145 
Stable  Boss'  Reports,  83 
Statement    of    employee's    earnings, 

77 
Stock 

Common,  213 

Preferred,   213 

Treasury,  213 
Stocks    and    Bonds,    affiliated    com- 
panies,  199 
Stocks  of  other  companies,  199 
Storage  Yards,  203 
Stores,   accounting  for,    173 
Stripping  Expense,  202 
Summary — Pay  Roll,  74 
Supplementary  Report  of  Coal  Pro- 
duced, 159 
Supplies 

Accounting  for,  85 

Comment  of  engineers  on,  2 

Daily  report  of  used,  87 

Internal  Revenue  rulings,  85 

Order  blank  for,  87 

Should   be    handled    througli    sup- 
ply house,  86 

Should  not  be  capitalized,  85 

When  charged  as  purchased,  89 
Supply  house,  86 
Supply  Report,    147 

Illustrated,    148 
Surplus,   213 

Earned  prior  to  March  1,  1913 

Earned     subsequently,     March     1, 
1913 

From  revaluation  of  mineral,  105, 
214 

Sinking  fund  reserve,  213 


Taxes,  133 

Accrued,  general,  207 
Capital  stock,  134 
For  local  improvements,  134 
Income    and    excess    profits,    135, 
Prepaid,   205 
To  be  distributed,  134 
Undeveloped  coal  lands,  134 
207 

Timbering,  49 

Time  Book,  63 

Superintendent  should  examine,  63 
Timekeeper  should  certify  to  cor- 
rectness of,  65 

Time   Sheets,   not  recommended,   05 


INDEX 


221 


Tipple  Sheet,  55 

To   be   balanced,   55 

To    show    how    coal    is    used,    58 
Tonnage  Record,  54 

Recapitulation   of  shipments,   156 
Track  Laying,  49 
Transfer  of  credits,  73 


U 


Unclaimed  Bond  Interest,  207 
Unclaimed  Dividends,  206 
Unclaimed   Wages,   206 
Undeveloped  coal  lands,  200 
U.   S.   Government  obligations,    198 


Ventilation,  50 

Voucher  Check,  180 

Voucher  Register,  183 

Voucher  System,  180 

Vouchers,  Accounts  Payable,  181 

Journal,   184,   185 

Miscellaneous  sales  and  transfers, 
187,  188 


Vouchers 

Petty  Cash,  186 

W 

Weighmaster  should  balance  pro- 
duction with  distribution,  daily, 
58 

Weighmaster's  check  sheet,  59 

Weight  Reports,   153 

West  Virginia  leases.  Method  of  fix- 
ing value  for  local  taxation, 
114 


Yardage  and  Dead  Work,  66 

Dijfferent  rates  for  pick  and  ma- 
chine work,  67 

Engineers  can  check  accuracy  of, 
68 

Reports    should    be    examined   by 
superintendent,  68 

Yards  paid  to  cutters  and  loaders 
should  balance,  68 
Yard  Expense,  51 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN    INITIAL     FINE     OF     25     CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.00  ON  THE  SEVENTH  DAY 
OVERDUE. 


MAR   6    1933 
MAR   7  1933 

JUN    28  1933 


MAY    20  1935 

JUN  2  U  1935 


NOV    3^'  '*• 


DEC   31970 


mfii-m 


LD  21-50m-l.'33 


YC  92629 


mm 

^■^^V   --^    1 

1 

^^H 

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1 

^v 

f            UNIVERSITY  OF  CAUFORNIA  LIBRARY 

